CNBC’s Jim Cramer on Monday told investors why he’s optimistic about CVS, even as the healthcare sector as a whole has lagged this year.
“[It’s] fixing its most problematic business, managed care, and seeing real strength in other parts of the business, especially the pharmacy side, where it is the last man standing,” he said. “Plus, given the cheapness of the stock, generosity of the dividend yield — here’s what I’m saying: buy CVS.”
Biopharmaceutical stocks have declined in recent months as the drug makers struggle to adapt to the Trump administration, especially with vaccine-skeptic Robert F. Kennedy Jr. leading the Department of Health and Human Services, Cramer said. The companies are also worried about the impact of tariffs on pharmaceuticals, he continued. Managed healthcare names also face issues as they are forced to pay out more than expected, he added.
But CVS has been “a port in the storm” for healthcare investors, according to Cramer, and shares are currently up more than 58% year-to-date.
Cramer was impressed with CVS’s most recent quarter, noting that the results are a stark change from last year, when management cut the full-year forecast several times. In July, the retail pharmacy chain comfortably topped earnings and revenue estimates, and management raised the outlook.
He suggested it’s important that CVS has been able to improve its managed care business, Aetna, which had been a sore spot. To Cramer, the business isn’t exactly thriving, but it’s much better. While the company acknowledged that medical costs remain high, Cramer was encouraged that it seems CVS is “finally getting its arms around the issue.”
Some of CVS’s success is owed to the decline of major rivals — which allows its drugstore business to take market share “like crazy,” Cramer said, especially the pharmacy division. The company’s top rival, Walgreens, announced plans to go private earlier this year and close hundreds of stores in the process. Competitor Rite Aid recently filed for its second bankruptcy in two years.
Cramer said he thinks the stock is inexpensive even as it’s up from the lows of last year.
“Even though the stock’s rebounded substantially from those levels, it’s still super cheap now that the numbers are going up higher,” he said.
CVS pointed CNBC to CEO David Joyner’s comments from the earnings announcement last month.
“Our strong performance demonstrates the continued focus we have on operational and financial improvement across our businesses, led by a significant and durable recovery at Aetna, strong retention at CVS Caremark and growth and momentum at CVS Pharmacy,” Joyner said.
