Jim Cramer: Why CVS Health Stock is Soaring This Year

CVS Health's Remarkable Turnaround

• 🚀 CVS Health has been a rare bright spot in the struggling healthcare sector, with its stock up over 58% this year.
• 💡 This performance is attributed to CVS becoming the last major rival standing in retail pharmacy, with competitors like Walgreens and Rite Aid facing significant challenges.

Managed Care Business Recovery

• 📈 The managed care division, Aetna, which was a drag last year due to low pricing and high medical costs, is showing a significant turnaround.
• ✅ In the latest quarter, the healthcare benefits division saw nearly 12% revenue growth and operating income up almost 40% year-over-year.
• 📊 CVS's medical benefits ratio improved, coming in lower than Wall Street expectations, despite elevated utilization rates.

Strength Across All Business Segments

• 💊 The drugstore business, encompassing both front-of-store and pharmacy, delivered a $1.5 billion revenue beat, with operating income up 7.6%.
• 🏥 The health services division, including the Caremark PBM and MinuteClinic, achieved 10.2% revenue growth.
• 🎯 All three of CVS's core businesses (pharmacy, PBM, and managed care) exceeded expectations in the recent quarter.

Financial Performance and Outlook

• 💰 CVS raised its full-year forecast significantly, boosting revenue guidance by nearly $9 billion and earnings outlook by 25 cents.
• 📉 Despite the substantial stock rally, CVS trades at only 11 times its new full-year earnings forecast, considered very cheap.
• 💸 The company offers a generous annual dividend of $2.66, resulting in a 3.7% yield.

Leadership and Investor Confidence

• 🌟 CEO David Joiner, in his first 10 months, has been praised for quickly addressing problems and driving the company's transformation.
• 📈 Analysts at UBS upgraded CVS to a 'buy,' citing strong execution and positive signs in the healthcare benefits segment.
• ✅ Cramer believes the turnaround is well underway, and with its cheap valuation and strong dividend, CVS has more room to run.