Moody’s Investors Service upped the retailer’s senior unsecured rating one notch to Baa1 on Monday, placing it three levels into investment grade. The rating raise comes a year after the so-called “patent cliff,” when patents on many branded drug offerings expired, opening the market to cheaper generic equivalents.
“The margins that retailers get on generics are generally better than on branded products,” Damien Conover, an analyst at Morningstar, told International Business Times on Tuesday. “Usually, you have multisource on the generic, as opposed to single source on the branded drug, so retailers can negotiate better terms on generics.”
Moody’s rated CVS’s outlook as stable and said it believes operating income will continue to grow.