CVS: Management change amid underperformance at Aetna

US financial services company’s Morningstar senior equity analyst Julie Utterback has published a new note regarding drug benefit manager CVS Health’s management change announcements.

Narrow-moat CVS Health made several announcements about a management shakeup, the firm's direction, and recent results that disappointed the market. At first glance, we are not changing our $93 fair value estimate or our Standard Morningstar Capital Allocation Rating, although the latter remains at the weak end of the category. The company’s shares remain cheap, she noted.

First, CVS announced that it has replaced chief executive Karen Lynch with CVS Caremark president David Joyner. Ms Utterback says she is not surprised by the management change given the execution shortfalls at CVS, especially at the Aetna medical insurer that Lynch previously led. However, investors may have been hoping for new blood from outside the organization.