Why CVS Stock Rallied Tuesday Morning
Key Points
CVS was called a "top pick" by one Wall Street analyst.
The healthcare giant's recovery is gaining traction.
CVS stock is reasonably priced.
- 10 stocks we like better than CVS Health ›
Shares of CVS Health (NYSE: CVS) rallied out of the gate on Tuesday morning, adding as much as 3.7%. As of 11:20 a.m. ET, the stock was still up 3.4%.
The catalyst that sent the healthcare giant higher was bullish commentary from one Wall Street analyst.
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A top pick
Jefferies analyst Brian Tanquilut affirmed his buy rating on CVS with a $120 price target. For those keeping score at home, that represents 28% upside compared to Monday's closing price.
The analyst called CVS one of his top picks and the firm's top large-cap healthcare services pick. He cited recent management commentary to support the bullish call, noting it suggests earnings per share (EPS) of at least $8.44 for 2027, with the potential for additional upside. Moreover, the company's share buybacks -- which are expected to resume in late 2026 or early 2027 -- are expected to bolster the stock price.
Finally, the ongoing recovery at CVS-owned Aetna bodes well for the company's future results. Aetna has taken a disciplined approach to its Medicare Advantage bids, leading to notable margin expansion. The health insurer and managed care company has increased its operating income by more than $2 billion year over year so far in 2026, indicating that the company's thoughtful approach to pricing is bearing fruit.
There's little question that the turnaround at CVS is gaining steam, as the company has beaten Wall Street's expectations in each of the past four quarters. Moreover, when the company reported its Q2 results in early August, management significantly increased its full-year guidance. CVS's forecast now calls for adjusted EPS of $8.00, representing 19% growth at the midpoint of its guidance, up from its outlook of $7.40 and 10% growth issued just three months ago.
To be clear, CVS still has a lot to prove. But at 26 times earnings, the price is right.
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Danny Vena, CPA has no position in any of the stocks mentioned. The Motley Fool recommends CVS Health. The Motley Fool has a disclosure policy.
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