On Friday, Jefferies maintained a Buy rating on Cigna Corporation (NYSE:CI), while adjusting the company's price target to $406.00 from the previous $422.00. The decision to lower the price target comes amidst discussions regarding Cigna's potential responses to industry developments and the company's financial performance.
The analyst from Jefferies addressed the speculation surrounding Cigna's response to recent news involving competitor Humana (NYSE:HUM), indicating that while Cigna is not ruling out certain strategies, the company is not currently pursuing them. The focus of the analysis was on the valuation of potential improvements in Humana's Medicare Star Ratings, which can affect reimbursements and bonuses from Medicare.
Cigna's pharmacy benefits management (PBM) margins have seen a further decline year-over-year, and there is an emphasis on the need for the company's Evernorth (EN) segment to accelerate in the fourth quarter to meet the full-year guidance. This acceleration is crucial for Cigna to achieve its stated financial targets for the year.
Looking ahead to 2025, the analyst noted that Cigna faces challenges, including general healthcare trends and the necessity for progress in its Evernorth business. However, the guidance provided by the company, potentially boosted by share repurchases, is seen as limiting the downside risk for investors.
Additionally, any incremental improvement in Evernorth's margins could lead to a significant upside for the company's financial outlook.
The revised price target reflects a cautious yet optimistic view of Cigna's future performance, balancing the current challenges with the potential for positive developments in the company's operations.
In other recent news, Cigna Group disclosed a strong third-quarter performance, reporting revenue of $63.7 billion and an adjusted earnings per share (EPS) of $7.51. The company anticipates a minimum of 10% EPS growth for 2025, buoyed by new client relationships and biosimilar offerings.
Cigna's telehealth services, particularly MDLIVE, have seen substantial growth, with a quarter of U.S. patients utilizing this platform last year.
The sale of Cigna's Medicare business to HCSC, projected to close in the first quarter of 2025, will largely fund share repurchases. The company's Evernorth Health Services and Cigna Healthcare platforms showcased robust growth, especially in specialty pharmacy and behavioral health services.
Despite facing challenges such as reduced net investment income and overhead costs from the Medicare sale, Cigna maintains a full-year EPS outlook of at least $28.40 for 2024.
Cigna's Value-Based Care strategy has been affected by recent market disruptions, leading to a cautious approach to expanding Evernorth Accountable Care relationships. Despite these challenges, the company remains optimistic about its future, as reflected in its strong growth in the specialty market, high client retention rates, and innovations such as EnCircleRx.
InvestingPro Insights
To complement Jefferies' analysis of Cigna Corporation (NYSE:CI), recent data from InvestingPro offers additional perspective on the company's financial health and market position. Despite the lowered price target, Cigna's market capitalization stands at a robust $88.1 billion, underscoring its significant presence in the healthcare sector.
InvestingPro Tips highlight Cigna's financial strength and shareholder-friendly policies. The company has maintained dividend payments for an impressive 43 consecutive years, demonstrating long-term stability. Moreover, Cigna has raised its dividend for 4 consecutive years, aligning with the analyst's view of limited downside risk for investors.
The company's P/E ratio (adjusted) of 16.49 for the last twelve months as of Q2 2024 suggests a relatively attractive valuation compared to the broader market. This metric, coupled with the InvestingPro Tip indicating that Cigna's valuation implies a strong free cash flow yield, supports the Buy rating maintained by Jefferies.
Cigna's revenue growth of 16.11% over the last twelve months and a quarterly growth of 24.4% in Q2 2024 reflect the company's ability to expand its business, which could contribute to the acceleration needed in the Evernorth segment as mentioned in the analyst report.
For investors seeking a more comprehensive analysis, InvestingPro offers additional tips and insights, with 11 more tips available for Cigna Corporation on the platform.
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