For Immediate Release
Chicago, IL – March 9, 2012 – Zacks.com announces the list of
stocks featured in the Analyst Blog. Every day the Zacks Equity
Research analysts discuss the latest news and events impacting
stocks and the financial markets. Stocks recently featured in the
blog include Citigroup Inc. ( C),
IBM Corp. ( IBM), CVS Caremark (
CVS), Express Scripts ( ESRX) and
Medco ( MHS).
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Here are highlights from Thursday’s Analyst
Blog:
Citi in Deal with IBM to Use
Watson
On Monday, Citigroup Inc. ( C) entered into an
agreement with IBM Corp. ( IBM) to identify the
uses of IBM Watson in banking services. As per the terms of the
deal, Citi will scrutinize the process of IBM Watson and will work
on some initiatives to improve customer interactions as well as
simplify banking services for them.
Watson, named after IBM founder Thomas J. Watson, is a computing
system that competes with the ability of human beings to answer
questions in natural language marked by speed, accuracy and
buoyancy. The technology, built up by a group of scientists,
precisely extort facts and helps understanding relationships
quickly in large volumes of data. Moreover, the technology can be
advantageous in increasing and enhancing decision-making process
across a range of industries.
In the current digital world, Citi is working hard to provide
its clients with the latest technology and improved services.
Therefore, the company will investigate the deep content analysis
and fact-based learning potentials found in IBM Watson as well as
study its usage for its customers. The bank will figure out
different ways under which IBM Watson technologies can evaluate the
needs of the customers, help them and carry out huge up-to-date
financial, economic, product and client data.
Citi has always been successful in exploring new ideas and
executing modern ways to help its customers with the banking
services according to their financial needs. Moreover, nowadays
customers anticipate best services to be provided by banks in an
integrated manner through various means such as phone, ATM,
live-chat and net banking, in person or in a branch on time.
IBM is continuously working on the improvement of Watson to make
it available in information-intensive industries. This technology
enables various companies to make decisions and improve their ways
of providing services to the customers.
Moreover, the partnership between IBM and Citi will come up with
different ways of applying Watson in the consumer financial market.
In addition to that, the pact would help taking significant step in
welcoming personalized banking in the 21st century.
It’s been almost 200 years since Citi started working with IBM.
Together, they came up with innovative ideas to enhance the use of
information technology in the financial services industry and are
enduring those efforts till today.
Citigroup currently retains a Zacks #5 Rank, which translates
into a short-term Strong Sell rating. However, considering the
fundamentals, we maintain a long-term Neutral” recommendation on
the stock.
CVS’s New “Pharmacy Home”
Recently, CVS Caremark ( CVS) along with
Harvard University and Brigham and Women's Hospital, conducted an
extensive research on health policy and came up with some new ways
to save more money while being treated. Through the study, they
pointed out the importance of a single ‘pharmacy home’ for pharmacy
customers.
According to the research data, patients using a single pharmacy
are more likely to connect with their own pharmacists on a regular
basis. The researchers consider this twice as effective as taking
prescribed medications and this will automatically reduce health
care costs by thousands of dollars annually. This is more
applicable to patients aging over 65 years who take two to three
times more prescription medications than others.
Around 10,000 people per day are expected to enter into the 65
years age group in the U.S. in the next 8 years. As a result, down
the line, this ‘pharmacy home’ concept of CVS is expected to gain
more importance.
CVS is gradually gearing up its performance in the field of
Pharmacy Services. After a sluggish phase in fiscal 2010, the
company exhibited improved performance in this segment throughout
2011 and has started off the 2012 selling season on a positive
note.
With 90% of the contract renewals scheduled for 2012 already
complete at the end of fiscal 2011, CVS’ retention rate was as high
as 98%. New business wins stood at an encouraging level of $7.2
billion (significantly up from the $6.8 billion provided on Analyst
Day on January 10, 2012).
The company also won some new accounts, which led to an increase
in estimates for the number of new Medicare Part D lives for 2012
to 200,000 lives, thus bringing the company’s Medicare Part D
prescription drug plans (PDP) lives up to approximately 3.6 million
as of February 2012. The company also expects another $5.5 billion
in new business wins associated with the PDP acquired from
Universal American in 2011 and Universal American's Medicare
Advantage plan.
However, despite implementing diverse strategies to expand its
business, CVS continues to face margin pressure. Gross margin
during the fourth quarter of fiscal 2011 decreased 258 basis points
(bps) year over year to 19.6%. Moreover, operating margin
contracted 60 bps to 6.9%.
In addition, the proposed merger between Express
Scripts ( ESRX) and Medco ( MHS) is
expected to further challenge CVS in the Pharmacy Services segment.
The deal is expected to combine two of the three largest US drug
benefit managers and create a dominant player in the PBM space that
will cover more than 150 million prescription drug consumers and
50% of the large employer market.
Together with CVS, they are expected to cover approximately 240
million prescription drug consumers. Consequently, post-merger,
even CVS would not be able to stand in competition with the
combined entity. We expect the merger to create market
concentration in the entire economy, leading to an anti-competitive
landscape for CVS.
CVS currently retains a short-term Zacks #2 Rank (Buy). Over the
long term, we have a Neutral recommendation in the stock.
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CITIGROUP INC (C): Free Stock Analysis Report
CVS CAREMARK CP (CVS): Free Stock Analysis Report
EXPRESS SCRIPTS (ESRX): Free Stock Analysis Report
INTL BUS MACH (IBM): Free Stock Analysis Report
MEDCO HLTH SOL (MHS): Free Stock Analysis Report
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