CORPORATESISSUER COMMENT 2 NOVEMBER 2015CVS HEALTH (CVS)Moodys Senior Unsecured Rating Baa1Moodys Outlook STABond-Implied Rating A3CDS-Implied Rating A1EDF-Implied Rating Aa1As of 10/30/2015ANALYST CONTACTSAllerton G. Smith 212-553-4058 Sr Dir-Sr Research Analyst allerton.smith@moodys.comABOUT CAPITAL MARKETS RESEARCHAnalyses from Moodys Capital Markets Research, Inc. (CMR) focus on explaining signals from the credit and equity markets. The publications address whether market signals, in the opinion of the groups analysts, accurately reflect the risks and investment opportunities associated with issuers and sectors. CMR research thus complements the fundamentally-oriented research offered by Moodys Investors Service (MIS), the rating agency.CMR is part of Moodys Analytics, which is one of the two operating businesses of Moodys Corporation. Moodys Analytics (including CMR) is legally and organizationally separated from Moodys Investors Service and operates on an arms length basis from the ratings business. CMR does not provide investment advisory services or products.View the CMR FAQ Contact the CMR team Follow us on TwitterMoodys Analytics markets and distributes all Moodys Capital Markets Research, Inc. materials. Moodys Capital Markets Research, Inc. is a subsidiary of Moodys Corporation. Moodys Analytics does not provide investment advisory services or products. For further detail, please see the last page.Market Signals ReviewCVS Health: All Market-Implied Ratings Decline The bond-, CDS-, and EDF'-implied ratings for CVS Health are below their best levels of the last 30 days (Figure 1).CVS shares fell 4.8% on October 30 after the company reported third-quarter earnings that fell short of Wall Street consensus estimates and CVS management forecast that for 2016 earnings would be between $5.68 and $5.88 a share, well below the $6.02 target forecast by analysts recently polled by Thomson Reuters.FIGURE 1. CVS HEALTH: MOODYS AND MARKET-IMPLIED RATINGS, 30 DAYS (DAILY DATA)The companys bond-implied rating varied between A2 and A3 over the last thirty days and is presently A3. The CDS-implied rating has been A1 since late October. Over the last monthMOODY'S ANALYTICS CORPORATES2 2 NOVEMBER 2015 MARKET SIGNALS REVIEW: CVS HEALTH: ALL MARKET-IMPLIED RATINGS DECLINEit fluctuated from Aa3 to A1. CVS Healths EDF-implied rating was Aaa one month ago, the highest possible level. Since then it slipped lower to Aa1 in the last week of October.According to our ratings gap-conditioned transition matrices, companies rated Baa1 with a bond-implied rating of A3 outperformed the broad market 25% of the time over the following 12 months, matched the markets performance 14% of the time, and underperformed the broad market 61% of the time.Readers will recall that when a market-implied rating falls, the underlying securities have underperformed the broad market. 1CVS Healths bond-, CDS-, and EDF-implied rat...
