Aetna Hits 52-Week High on Sound Fundamentals - Analyst Blog


On Jun 30, 2014, shares of Aetna Inc. ( AET ) jumped to a 52-week high of $82.70. With about 2.9 billion shares exchanging hands in the last trading session, shares gained 1.2%, finally closing at $82.06.   

The rally in the stock was brought about by investor optimism on the company which recently experienced a positive rating action from A.M. Best Co.  The company has also been performing strongly, unfazed by the challenges grappling the health insurance industry.

Aetna delivered positive earnings surprise in two of last four quarters, with an average beat of 8.4%.

Year to date, the stock has gained 22.2%, higher than 10.7%, 20.6% and 7.5% clocked by its peers, UnitedHealth Group Inc. ( UNH ), WellPoint Inc. ( WLP ) and Cigna Corp. ( CI ), respectively.  

Last month, Aetna announced the formation of another Accountable Care Organization (ACO) with LHS Health Network. Via this agreement, Aetna will serve its members in Camden, Burlington and Gloucester counties. Notably, ACOs allow the company to exercise tighter control over medical management, leading to 10% savings on average. Such news fortifies investors' confidence in the company which is making relentless efforts to serve its members at the most reasonable cost.

The insurer scored strongly in the rating action taken up by A.M. Best Co. last month. The rating agency upgraded the issuer credit rating (ICR) of  units - Aetna Health and Life Insurance Company (AHLIC) - to "a+" from "a" and affirmed the FSR of 'A' along with reiterating the ICR of "bbb+" and debt ratings of Aetna.

Aetna has made considerable investments in products and technology, with an intention to extend its core health business and capitalize on exciting new consumer and provider opportunities emerging in the marketplace. These initiatives bode well for the company which is seeking to diversify its operations.

Aetna's Coventry acquisition is turning out to be more accretive than earlier estimated which is contributing to overall earnings. Aetna is also making inroads into international markets, which offer huge growth opportunities.

Aetna carries a Zacks Rank #2 (Buy).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Business , Stocks

Referenced Stocks: WLP , AET , CI , UNH

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