Cigna Hits 52-Week High On Strong Q2 Results, Upbeat View

On Aug 16, the stock of Cigna Corp. (NYSE:CI) hit a 52-week high of $180.42. The rise in the stock is believed to have been driven by better-than-expected second-quarter results and a subsequent guidance raise.

Cigna’s second-quarter earnings and revenues beat estimates by 17.3% and 2.9%, respectively. The earnings beat reflected strong contribution from each of the company’s business segments.

Cigna pulled up its 2017 earnings guidance after strong results. It expects adjusted income from operations between $2.50 billion and $2.58 billion (previous estimate was $2.41 billion to $2.53 billion), or $9.75 to $10.05 per share ($9.25–$9.75).

It, however, maintained the guidance for revenue growth rate at 3% to 4%, and the global medical customer growth range of 0.5 million to 0.6 million.
In one year, the stock has rallied 35.6%, outperforming the industry’s gain of 30% and significantly higher than the return of 12.4% from the S&P 500 index.

Investors also favorably viewed Cigna’s recent purchase of Zurich Insurance Middle East, which will strengthen its foothold in the Gulf countries of UAE, Lebanon, Kuwait and Oman. The deal will bolster its already strong international business, the premium at which has witnessed a 12% CAGR to $1.9 billion in 2016 from $0.9 billion in 2009.

This deal has made the company’s investors quite optimism about its efforts to diversify operations outside U.S. markets that are faced with stiff competition and stringent regulations.

Shares also received a boost from the lifting of MA sanctions (last month) by CMS. The company was restricted to sell MA plans since Jan 2016, after it was found guilty of violating regulations relating to these.

Now, with the sanctions lifted, Cigna will be able to participate in an open enrollment period for 2018 plans, which will start from Nov 1, 2017. The development will add to the company’s organic growth by increasing MA membership.

Shares of the company have performed strongly despite the failed merger of Cigna with Anthem Inc. Cigna’s investors have the confidence in its ability to grow as a stand-alone entity.

Recently, the company projected 2021 earnings per share (EPS) of $16, and an EPS annual growth guidance of 10-13%. The 2021 EPS guidance took into consideration substantial balance sheet strength of $7 billion to $14 billion deployable cash.

Cigna carries a Zacks Rank #3 (Hold). Some better-ranked players in the space are Aetna Inc. (NYSE:AET) , Anthem, Inc. (NYSE:ANTM) and WellCare Health Pans Inc. (NYSE:WCG) . Each of these stocks carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Aetna, one of the largest health benefits companies, beat estimates in each of the last four quarters with an average positive surprise of 19%.

Anthem is a health care company, which provides medical products, through its subsidiaries. It surpassed estimates in three of the last four quarters with an average positive surprise of 8.6%.

WellCare Health Plans, provides managed care services targeted exclusively at government-sponsored healthcare programs. It beat estimates in each of the last four quarters with an average positive surprise of 47.4%.

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