In a filing on Thursday, healthcare behemoth CVS Health (NYSE:CVS) said that its Aetna National preferred provider organization (PPO), a Medicare health insurance plan, was downgraded by the Centers for Medicare & Medicaid Services (CMS) based on the quality of its services. The quality ratings for the plan, which has 1.9 million members, slid from 4.5 to 3.5 out of 5 stars for 2023.
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Shares of CVS Health tumbled more than 4.6% in the extended-trading session Thursday, as the filing was released.
The filing stated that the downgrade has deemed Aetna National PPO ineligible to receive CMS’ quality bonus payments related to 2024. The decline in Star ratings is a headwind to CVS’s earnings per share (EPS) as well as 2024 revenues.
However, the company assured investors that they are “evaluating a variety of operational initiatives and capital deployment alternatives, including share repurchases, to help to offset this projected earnings headwind.” The goal of the company is to maintain a low double-digit year-over-year adjusted EPS growth rate in 2024, as guided in December last year.
What is the Target Price for CVS Stock?
The average price target for CVS stock currently stands at $123, which implies that it has room to grow by 25% over the next 12 months. Moreover, Wall Street analysts are bullish on the stock, with a Strong Buy consensus rating based on nine Buys and two Holds.
