Overview#
Bernstein has recently upgraded both Cigna Group and CVS Health Corp to an 'Outperform' rating. This decision comes as analysts believe that recent reforms in pharmacy benefit managers (PBMs) have alleviated significant concerns for these companies.
Cigna's Upgrade#
Analyst Lance Wilkes has raised Cigna's rating to 'Outperform' and increased the price target from $307 to $358. He argues that the reforms in PBMs will enhance Cigna's valuation over time. The changes include a new transparency bill and a settlement from the Federal Trade Commission (FTC), along with Cigna's own adjustments to its PBM model. Bernstein has also increased its target valuation multiple for Cigna from 9.5x to 11x, indicating a positive outlook for its Evernorth segment, which is expected to improve from approximately 8.5x to 10.5x.
CVS Health's Outlook#
Similarly, CVS has been upgraded to 'Outperform' with a new price target of $94, up from $91. Wilkes notes that the PBM reforms are helping to reduce uncertainties surrounding CVS, while the Aetna insurance unit is gaining momentum. He anticipates that Aetna's earnings could nearly double over the next three years as Medicare Advantage margins stabilize.
Future Projections#
While Bernstein predicts modest earnings per share (EPS) growth for CVS in 2026 due to ongoing pressure on PBM margins, they expect a return to steady growth from 2027 to 2029, projecting a compound annual growth rate (CAGR) of 9%. Following the upgrades, Bernstein has adjusted its valuation multiple for CVS to 12x next twelve months (NTM) EPS.