Investing.com – Analysts at TD Cowen raised their rating on CVS Health (NYSE:) to “buy” from “hold,” citing changes to Medicare Advantage plan benefits for 2025 announced earlier this week.
Along with peers like Humana (NYSE:) and Cigna (NYSE:), CVS unveiled details of next year’s government-backed health insurance plans for people 65 and older on Tuesday, before enrollment for Medicare Advantage benefits begins later this year. month.
The U.S. government pays private insurers like CVS a set price to administer so-called Medicare Advantage plans, which offer seniors additional benefits not typically included in regular government coverage.
According to the Centers for Medicare and Medicaid Services (CMS), Medicare Advantage plan enrollment is expected to expand to 35.7 million people in 2025.
In a note to clients, TD Cowen analysts said CVS’s newest Medicare Advantage plan includes “meaningful” reductions in benefits for over-the-counter drug purchases and smaller allowances for dental coverage.
CVS is also likely to see the number of people signing up for its highly rated 4-star plans increase to 90% next year, up from 73% in 2024. Star ratings are a measure of health and fitness performance. Prescription drug plans implemented by CMS.
“This gives us greater conviction that 2024 represents a floor for the stock, as well as greater confidence in CVS’s ability to see (double-digit) (adjusted) (earnings per share) growth in (2025) (…) and beyond,” TD Cowen analysts wrote. .
Shares of Rhode Island-based CVS Health rose slightly in U.S. premarket trading on Friday. It has fallen more than 22% so far this year, reflecting recent investor concerns about its performance.
Previous media reports indicated that CVS is considering several options to overhaul the business, including breaking up its retail and insurance divisions.
The company announced on Tuesday that it would lay off about 2,900 workers, or just under 1% of its headcount, as part of a cost-cutting campaign. CVS said most of the affected roles will be in the company’s operations rather than in its ubiquitous stores and pharmacies.