CVS Caremark's tobacco exit is a numbers game

|About: CVS Health Corporation (CVS)|By:, SA News Editor

The decision by CVS Caremark (CVS) to stop selling tobacco products will add to profits despite the immediate hit to revenue from lost cigarette sales, according to analysts watching the sector.

Mizuho Securities sees a $0.16-$0.21 per share benefit right off the top if CVS renews a deal with the Federal Employee Health Program at the end of the year.

Other analysts have their eyes on recent trends showing CVS gaining momentum in improving its margins and supply cost reductions.

The savings from the tobacco exit start piling up even more if CVS wins more market share in pharmacy benefits management with its shift toward becoming a favored health services company.

What to watch: CVS trades with a valuation that is roughly on par with the S&P 500, but investors may be discounting its transcendent ability to grow profits through its evolution.