Evercore ISI reiterated an Outperform rating and $125 price target on CVS Health following reports the company is considering a spinoff of its retail pharmacy business. CVS currently trades at $91.41, giving it a market capitalization of $116.9 billion.
The Financial Times reported after market close that CVS Health is discussing a plan to spin off its approximately 9,000-store retail pharmacy business into a separately listed company, while keeping the pharmacy benefit manager Caremark together with the remaining business. The Wall Street Journal reported the split is set to be completed, though structure and timing could still change.
Evercore ISI noted this is not the first time a CVS breakup has been reported, referencing similar reports in 2024. The firm characterized the transaction as complex with a high degree of execution risk and many details remaining to be decided. The split could help relieve some regulatory concerns at the state level regarding joint ownership of a pharmacy benefit manager and retail drug store.
An announcement could come as early as Wednesday morning when CVS reports third-quarter results. The Financial Times and Wall Street Journal reports suggest the retail pharmacy operations could become a separately listed entity by the first half of 2028. TD Cowen's analysis estimates the spinoff could generate approximately $71 billion in proceeds based on a sum-of-the-parts valuation model.
Analysts from TD Cowen, Mizuho, Raymond James, and BofA Securities have reiterated Buy or Outperform ratings on CVS Health. TD Cowen and BofA Securities set a $110 price target, while Mizuho and Raymond James set a $120 price target. CVS has maintained dividend payments for 56 consecutive years, currently offering a 2.91% yield.
CVS Health (CVS) reports third-quarter earnings Wednesday morning. Investors should monitor the company's announcement regarding spinoff plans, regulatory positioning, and updated financial guidance.