One big-name health care stock has mounted one of the sharpest comebacks of the year, and Jim Cramer thinks it’s far from being done yet.
Though the rest of the health care sector grapples with political headwinds, ballooning costs, and bankrupt rivals, this name is busy raising forecasts, beating top-and-bottom-line quarterly estimates, and throwing off a dividend yield north of 3%.
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Cramer hails it as a “port in the storm,” with a valuation that’s still remarkably cheap, despite its recent fireworks at the stock market.
He believes this comeback health care giant is heating up, and for good reason, even after a rocking run.
Who is Jim Cramer?
Jim Cramer is perhaps the most respected name in the investing space, and a former hedge-fund manager turned CNBC mainstay.
Over the past several years, he’s effectively shaped the U.S. retail-investor scene, starting out in Goldman Sachs with his hedge fund, Cramer Berkowitz, and co-founding this very site, TheStreet, in 1996.
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He’s hosted “Mad Money” on CNBC since 2005, blending financial education with high-energy theatrics to make stock-picking much more exciting.
His calls can spark the so-called “Cramer bounce,” a short-term bump in stock prices following on-air mentions. Moreover, Cramer runs a Charitable Trust portfolio through the CNBC Investing Club, disclosing his trades, weightings, and positions transparently.
Also, he boasts an incredible track record, with an often cited 14-year run averaging 24% annually as a fund manager, along with an over $150 million net worth.
Jim Cramer thinks CVS Health stock still has room to run
Jim Cramer is keeping faith with CVS Health (CVS) , which is one of the few health care stocks that has absolutely crushed it this year.
“I think it’s got more. I don’t think it’s done,” the “Mad Money” host said, touting the stock’s attractive valuation and income appeal. For perspective, CVS trades at just 11 times forward earnings and pays a $2.66 dividend, good for a 3.7% yield.
CVS’s performance is especially impressive, despite the sluggishness in the health care space of late.
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Walgreens is going private while shuttering its stores, and Rite Aid filed for a second bankruptcy. Conversely, CVS’s Aetna unit continues to impress, delivering stronger managed-care results, while cementing Cramer’s view that the rally still has legs.
CVS Health has been on a tear at the stock market this year, up more than 58% with the fundamentals to back it up. Also, with a Tipranks smart score of 8/10, CVS stock has an excellent chance of outperforming the market.
Its Q2 results showed impressive momentum in its health care benefits division, with sales up nearly 12%, while operating income soared close to 40% year over year.
Surprisingly, CVS' efficiency metrics dazzled, with its medical benefits ratio at 89.9%, better than analyst estimates.
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Earnings blew past expectations, too.
CVS posted $1.46 EPS, blowing past expectations by $0.35, while comparable pharmacy sales were up a stellar 18%. Consequently, its management responded by hiking guidance in a big way.
As Jim Cramer put it:
“For the second consecutive year, CVS raised its full-year forecast. They took the revenue guidance up by nearly $9 billion… boosted their full-year earnings outlook by 25 cents at the midpoint.”
2025 has been a tough year for health care investors
The broader health care space has mostly been a mixed bag this year, which is why Cramer’s CVS call stands out.
“It hasn’t been a good year for the health care sector,” he said, highlighting the political turbulence on drug pricing and surprise spikes in medical-related expenses.
The Health Care Select Sector SPDR is only up a meager 1.3% year to date, meaning it's barely keeping pace with inflationary pressures.
Biotech’s a split story, with large-cap players in IBB up 5.9% YTD, but XBI, which tracks smaller players, is flat at 1%, dragged down by choppy trial results and tighter funding.
The weight of elevated medical utilization has also bogged down managed care stocks, but distributors have emerged as quiet winners.
McKesson, for instance, just posted 23%+ top-line growth in its most recent quarter, raising full-year guidance, in a nod to strength in specialty medications and growing GLP-1 demand.
Moreover, valuation tells the tale, with the sector trading at just 16.6 times forward earnings, compared to 23.3 times for the S&P 500. For perspective, that’s the deepest relative discount in 30 years.
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