The national opioid settlement removes the uncertainty that should help drug store stocks and Teva Pharmaceutical (TEVA). Ahead of the $17.3 billion settlement, TEVA, CVS Health (CVS), and Walgreens (WBA) traded near their lows.
All three stocks are bargain basement stocks value investors may consider buying.
CVS Health has lower risks than Walgreens. It acquired Aetna for $70 billion in 2018 to build a vertical healthcare service. Conversely, Walgreens completed smaller acquisitions, such as buying the rest of CarCentrix for $392 million. Unfortunately, poor store performance post-Covid is hurting its prospects.
Walgreens and CVS have high shrinkage. Theft rates are increasing, hurting their profitability. As they work through that issue, income investors may hold CVS stock for a 3.37% dividend yield. WBA stock yields 6.11%.
Opioid Settlement
Teva has the biggest upside from the opioid settlement. For years, the stock languished as markets estimated the legal cost. Last week, Teva, Walgreens, CVS Health, and AbbVie’s (ABBV) Allergan agreed to pay $17.3 billion as part of a national settlement involving the US opioid crisis.
Teva settled separately with Nevada in a $193 million payment over 20 years.
Expect Teva to post rising operating margins and revenue in the quarters ahead.
