Zacks Highlights Dulling Prospects for CVS, WBA, HLF, and AMZN

CVS Health, Walgreens Boots Alliance, and Herbalife struggle under industry pressures while Amazon thrives, creating significant competitive challenges for healthcare retailers.

Date: 08-09-2024

AI Rating: 4

The current report underscores that CVS Health, Walgreens Boots Alliance, and Herbalife are facing significant headwinds due to rising expenses, labor shortages, and ongoing pressure from non-reimbursable pharmacy expenses. These challenges negatively affect stock performance within the Retail - Pharmacies and Drug Stores industry.

Earnings Per Share (EPS):

CVS's consensus estimate for 2024 suggests a 25.4% decline compared to 2023 levels, indicating a pronounced downward trend in profitability forecasts. Such a drop indicates a highly negative trajectory in their earnings outlook.

Revenue Growth:

Herbalife is projected to see a 1.8% decrease in revenue for 2024, coupled with an alarming 59.3% decline in earnings from the previous year. This raises concern over Herbalife's ability to sustain revenue growth amid operational challenges.

Profit Margins:

Both CVS and Herbalife are grappling with increased pressures on profit margins due to rising drug prices and non-reimbursable expenses. As stated in the report, the continuing rise in medicine prices, largely attributed to raw material costs, directly impacts their bottom lines.

Industry Performance:

The industry has also collectively underperformed against the S&P 500 and its sector, losing 22.7% in the past year. A comparison of current P/E ratios reveals that the Retail - Pharmacies and Drug Stores industry is significantly undervalued at 7.45X compared to the S&P 500's 21.17X.

Impact of Amazon:

Amazon's advancing presence in the pharmacy sector, including initiatives like RxPass and drone delivery services, further intensifies competition for CVS, Walgreens, and Herbalife. Amazon's entry into this space poses a notable risk to existing players, driving potential declines in their market shares.

In summary, given the significant negative trends for CVS, Herbalife, and Walgreens, their outlook appears grim amid competition from Amazon and broader market pressures. The lack of positive financial signals and performance metrics suggests that these stocks could see further declines unless substantial improvements are realized.

Stocks: CVS WBA HLF AMZN