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Stock Market News: CVS to Head for Washington; Chicken Lifts Sanderson Farms

By Dan Caplinger - Updated Apr 12, 2019 at 9:02PM

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The overall mood in the market looked good Wednesday morning.

The stock market gained ground on Wednesday morning, with investors getting past some company-specific headlines to focus on the broader strength of corporate America. As of 11:20 a.m. EDT, the Dow Jones Industrial Average ( ^DJI -0.17% ) was up 198 points to 25,753. The S&P 500 ( ^GSPC -0.84% ) rose 24 points to 2,816, while the Nasdaq Composite ( ^IXIC -1.92% ) gained 67 points to 7,658.

High-profile stories like the Ethiopian Airlines crash continued to draw a lot of attention from market participants, and that threatened to leave some other key news unnoticed. CVS Health ( CVS 0.98% ) has seen its stock lose half its value since 2015, but it's up today despite the company getting an invitation to go before lawmakers. Meanwhile, favorable reports in a key meat market helped lift shares of Sanderson Farms ( SAFM 0.24% ).

Rows of CVS-labeled prescription bags on a set of shelves.

Image source: CVS Health.

Congress wants a word with CVS

Shares of CVS Health rose 4%, with investors reacting favorably to positive comments from stock analysts at Bernstein. The analyst company noted that it expects the majority of prescription fulfillments to move to online sources in the long run, but that didn't stop it from giving CVS an outperform rating and setting a $76 per share price target on the stock. That implies a 40% upward move for CVS shares.

Yet the analyst's comments come shortly after CVS got an invitation from the Senate Finance Committee to testify before Congress on April 3. Certain high-profile senators have been extremely critical of pharmacy benefit managers (PBMs) like the CVS Caremark unit, arguing that they act as unnecessary intermediaries that simply skim extra profit from transactions between pharmaceutical companies and consumers. Having already talked to large drug companies who blamed PBMs for high prescription prices, the committee wants to get the other side of the story, and CVS will join several of its peers to make its case.

For its part, CVS has worked hard to position itself for whatever comes next, becoming a healthcare-retail conglomerate that includes thousands of retail locations and a health insurance company alongside its PBM business. However, CVS will probably never own a pharmaceutical company, and shareholders can expect CVS to see continued tension with drugmakers for the foreseeable future.

Check out the latest earnings call transcript for CVS Health and other companies we cover.

Sanderson stock takes flight on chicken wings

Shares of Sanderson Farms were higher by a more modest 2% on Wednesday morning, but that marked its best share-price level since late 2016. The meat company earned favorable comments from analysts at JPMorgan, who said that rising chicken prices were putting Sanderson in a much more favorable position. JPMorgan boosted its rating on the stock from underperform to neutral, setting a price target of $127 per share, $39 higher than its previous call and roughly where the stock trades today.

Things are still far from certain for the chicken market's near-term prospects. The possibility that tariffs between the U.S. and China could ease up if the two nations come to a trade agreement is a definite positive, and overall chicken volume across the industry has fallen recently. However, some competitors are looking at boosting their chicken capacity, and that could spur another downward move in the pricing cycle for the chicken market.

However, Sanderson Farms has gotten more optimistic. In its latest conference call with investors in late February, CEO Joe Sanderson said that although prices for boneless breast meat fell to all-time lows toward the end of 2018, he's seen a recovery in the market over the past couple of months. Lower prices for feed are also helping the company, and Sanderson wants to bolster growth in key niches. Rather than playing chicken against rivals by concentrating solely on volume, Sanderson has taken an approach that emphasizes quality as well -- and that could pay off for shareholders in the long run.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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Stocks Mentioned

CVS Health Corporation Stock Quote
CVS Health Corporation
$90.87 (0.98%) $0.88
Sanderson Farms, Inc. Stock Quote
Sanderson Farms, Inc.
$188.68 (0.24%) $0.46
Dow Jones Industrial Average (Price Return) Stock Quote
Dow Jones Industrial Average (Price Return)
$34,580.08 (-0.17%) $-59.71
S&P 500 Index - Price Return (USD) Stock Quote
S&P 500 Index - Price Return (USD)
$4,538.43 (-0.84%) $-38.67
NASDAQ Composite Index (Price Return) Stock Quote
NASDAQ Composite Index (Price Return)
$15,085.47 (-1.92%) $-295.85

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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