TD Cowen Picks 4 Pharmacy Stocks With Attractive Q3 Setups

Investing.com -- TD Cowen maintains a positive outlook on the pharmacy benefit manager (PBM) and pharmacy sector heading into the third quarter, citing healthy specialty pharmacy trends and favorable managed care organization commentary at recent conferences. The bank highlights attractive valuations and anticipated earnings beats across several names in the group.

Analysts expect continued strength in specialty pharmacy to drive performance, while management teams are likely to provide clarity on 2027 frameworks during upcoming earnings calls. Key focus areas include GLP-1 coverage programs, 340B drug pricing impacts, and Medicare Advantage dynamics.

CVS Health

TD Cowen expects a third-quarter adjusted earnings per share beat and raised guidance, driven by continued strength in the Health Care Benefits segment and upside in the Pharmacy and Consumer Wellness division from its GLP-1 bridge program and new MinuteClinic GLP-1 offering.

The firm sees potential for management to revise its "at least" $8.44 adjusted EPS floor higher for 2027, depending on the size of the third-quarter beat. Analysts anticipate management will provide additional color on 2027 moving pieces, particularly 340B drug pricing, health services segment headwinds and tailwinds, including the 2027 selling season, health plan attrition, and GLP-1 coverage.

It also expects updates on Medicare Advantage expectations for 2027 following public benefits data and the impact of lower star ratings on achieving 2028 long-range plan targets.

Cigna Group

Following the company’s investor day, TD Cowen expects focus to shift to 2027 given multiple moving pieces including GLP-1 coverage, 340B, and health insurance exchange exit. The firm expects management to provide 2027 headwinds and tailwinds that suggest adjusted EPS above $33, which appears higher than current expectations.

For the third quarter, analysts expect solid Evernorth Health Services performance driven by continued momentum in specialty pharmacy. The firm anticipates an in-line Cigna Healthcare medical care ratio at consensus of 85.1%.

BrightSpring Health Services

TD Cowen expects a third-quarter beat and raise, viewing consensus expectations for pharmacy gross profit quarter-over-quarter growth of 1% as conservative. The firm sees upside from continued limited distribution drug ramps and some benefit from Bosulif generic introduction. Analysts believe risk for shares skews to the upside and that a positive third-quarter print could drive a strong reaction.

Option Care Health

Following McKesson and CD&R’s announced acquisition, the company will no longer hold a third-quarter call. TD Cowen believes the company can beat its conservative third-quarter guidance of 4%-6% quarter-over-quarter adjusted EBITDA growth versus a prior two-year average of approximately 6%.

Original Article

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