CVS Health Corporation

CVS Details

CVS Health Corporation (NYSE: CVS) is a diversified health services company. It operates more than 9,900 retail locations, ~1,100 walk-in medical clinics, a pharmacy benefits manager with approximately 108 million plan members, specialty pharmacy services, and a senior pharmacy care business (as of July 28, 2021). As of September 15, 2021, the company's market capitalization stood at USD 110.70 billion.

Redemption of 4.30% Senior Notes: On August 23, 2021, CVS priced and upsized a cash tender offer (initially announced on August 09, 2021) to buy back its outstanding USD 2.05 billion aggregate principal amount of 4.30% senior notes due 2028. The noteholders, who validly tendered their notes (and which tenders are accepted for purchase) on August 20, 2021, will now be entitled to receive total consideration of USD 1,162.08 (including an early tender premium of USD 30.00) per USD 1,000 principal amount. The offer expired on August 24, 2021.

Q2FY21 Results: The company reported YoY growth of 11.13% in total revenue to USD 72.62 billion in Q2FY21 (ended June 30, 2021) compared to USD 65.34 billion in Q2FY20. Net income for Q2FY21 reduced to USD 2.78 billion from USD 2.98 billion in Q2FY20. As of June 30, 2021, the company had cash & cash equivalents of USD 10.13 billion and total debt of USD 59.35 billion.

Key Risks: CVS operates in the highly competitive health care provider and services industry and faces intense competition in each of its segments across geographies, which could cause pricing pressure. Should this trend continue, its financials could be negatively impacted.

Outlook: In FY21, CVS expects to generate total revenue in the range of USD 280.7 – 285.2 billion, thus realizing YoY growth of 4.50% – 6.25%, along with an adjusted operating income to the tune of USD 16.1 – 16.3 billion. Its GAAP EPS is estimated to range between USD 6.35 – 6.45, along with a non-GAAP EPS of USD 7.70 – 7.80. In addition, it expects to incur capital expenditures in the range of USD 2.7 – 3.0 billion during the year.

Valuation Methodology: Price/Earnings Per Share Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

CVS Daily Technical Chart (Source: REFINITIV)

Stock Recommendation: CVS' stock price has increased 23.40% in the past nine months and is currently close to the higher end of its 52-week range of USD 55.36 to USD 90.61. The stock is currently trading above its 50 and 200 DMA levels, and its RSI Index is at 53.57. We have valued the stock using the Price/Earnings-based relative valuation methodology and arrived at a target price of USD 73.59. Considering the significant uptick in the stock price, we believe the current price sufficiently reflects the decent business fundamentals. Hence, we recommend a "Sell" rating on the stock at the closing price of USD 85.54, up 1.97% as of September 15, 2021.

* All forecasted figures and Industry Information have been taken from REFINITIV.

* The reference data in this report has been partly sourced from REFINITIV. 

Boston Scientific Corporation

BSX Details

Boston Scientific Corporation (NYSE: BSX) is engaged in developing, manufacturing, and marketing medical devices used in a variety of interventional medical specialties. It assists physicians and other medical professionals in diagnosing and treating a wide range of diseases and medical conditions and improving patients' quality of life by offering alternatives to surgery and other invasive medical procedures.

Achieving Inorganic Growth via Horizontal Acquisitions: On September 01, 2021, BSX acquired the global surgical business of Lumenis Ltd, a privately-held developer of energy-based medical solutions, from a subsidiary of Baring Private Equity Asia (BPEA), for a cash consideration of USD 1.07 billion. Lumenis' surgical operations comprise top-of-the-line laser systems, fibers, and accessories for urology and otolaryngology operations, with an estimated revenue of ~USD 200 million for FY21.  BSX will now market these lasers and fibers and the otolaryngology laser portfolio to all geographies, including high-growth regions like China.

Q2FY21 Results: The company reported a YoY surge of 53.62% in net sales to USD 3.08 billion in Q2FY21 (ended June 30, 2021) compared to USD 2.00 billion in Q2FY20. The Q2FY21 revenue includes the net sales from Preventice Solutions, Inc. following the closing of its acquisition on March 01, 2021. In addition, BSX reported a net income of USD 172 million in Q2FY21 vs. a net loss of USD 153 million in Q2FY20. As of June 30, 2021, the company had cash & cash equivalents of USD 2.68 billion and total debt of USD 9.11 billion.

Key Risks: BSX is dependent on a third-party supplier for the majority of its raw material and key manufacturing component. Also, some of its components and raw materials are sourced from a single vendor. Hence, any lag in the supply of the requisite quantity or unfavorable pricing could distort its production and, in turn, negatively impact its overall performance.

Outlook: In Q3FY21, BSX expects a YoY sales growth of ~12% –14% on a reported and organic basis, along with an EPS of USD 0.20 – 0.22 and USD 0.39 – 0.41 on GAAP and non-GAAP basis, respectively.

For FY21, the YoY increase in its revenue is estimated to be ~21% – 22% and ~19% – 20% on a reported and organic basis, respectively. It also expects its GAAP EPS to range between USD 0.79 – 0.83, along with a non-GAAP EPS of USD 1.58 – 1.62.

Valuation Methodology: Price/Earnings Per Share Multiple Based Relative Valuation  

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

BSX Daily Technical Chart (Source: REFINITIV)

Stock Recommendation: BSX's stock price has increased 28.38% in the past nine months and is currently close to the higher end of its 52-week range of USD 32.99 to USD 46.29. The stock is currently trading above its 50 and 200 DMA levels, and its RSI Index is at 53.83. We have valued the stock using the Price/Earnings-based relative valuation methodology and arrived at a target price of USD 38.17. Considering the significant uptick in the stock price, we believe the current price adequately reflects the business fundamentals and recommend a "Sell" rating on the stock at the current price of USD 45.10, up 0.56% as of September 15, 2021, 2:57 PM ET.

* All forecasted figures and Industry Information have been taken from REFINITIV.

* The reference data in this report has been partly sourced from REFINITIV.

Exelon Corporation

EXC Details

Exelon Corporation (NASDAQ: EXC) is a utility services holding company, which along with its subsidiaries, supplies electricity and natural gas in 48 states of the US, districts of Columbia, and Canada. EXC is one of the major power generators in the US, with more than 31,000 megawatts of nuclear, gas, wind, solar, and hydroelectric producing capacity, making it one of the cleanest and most cost-effective power generation fleets in the country.

Strategic Collaboration: On September 14, 2021, Exelon Generation Company, LLC (d/b/a Exelon Power Services), a subsidiary of EXC, collaborated with Crayhill Renewables, an affiliate of Crayhill Capital Management, to provide a complete lifecycle management program that offers end-to-end finance and operational services to renewable energy projects. The partnership will provide renewable developer solutions, including pre-Notice to Proceed (pre-NTP) lending, transmission and development advisory, take-out equity (from Crayhill), and post-Commercial operations date operating solutions (from Exelon).

Q2FY21 Results: The company reported YoY growth of 8.10% in total operating revenue to USD 7.92 billion in Q2FY21 (ended June 30, 2021) compared to USD 7.32 billion in Q2FY20. Net income for Q2FY21 reduced to USD 401 million from USD 521 million in Q2FY20. As of June 30, 2021, the company had cash & cash equivalents of USD 1.58 billion and total debt of USD 40.97 billion.

Key Risks: EXC's power generation facilities are fueled by nuclear fuel and fossil fuels, the pricing of which is highly volatile and unpredictable. Any lag in the supply of requisite quantity or unfavorable pricing could distort the company's overall performance.

Outlook: In FY21, EXC expects its adjusted operating EPS to be in the range of USD 2.60 – 3.00.

Valuation Methodology: Price/Earnings Per Share Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

EXC Daily Technical Chart (Source: REFINITIV)

Stock Recommendation: EXC's stock price has increased 17.99% in the past six months and is currently close to the higher end of its 52-week range of USD 33.97 to USD 50.99. The stock is currently trading above its 50 and 200 DMA levels, and its RSI Index is at 66.91. We have valued the stock using the Price/Earnings-based relative valuation methodology and arrived at a target price of USD 42.29. Considering the uptick in the stock price, we believe the current price adequately reflects the business fundamentals and recommend a "Sell" rating on the stock at the current price of USD 50.70, down 0.64% as of September 15, 2021, 12:40 PM ET.

* All forecasted figures and Industry Information have been taken from REFINITIV.

* The reference data in this report has been partly sourced from REFINITIV.

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The advice given by Kalkine Canada Advisory Services Inc. and provided on this website is general information only and it does not take into account your investment objectives, financial situation and the particular needs of any particular person. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. The website www.kalkine.ca is published by Kalkine Canada Advisory Services Inc. The link to our Terms & Conditions has been provided please go through them. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations later.