We are reiterating our Outperform recommendation on the shares
) following better-than-expected second quarter earnings results.
Aetna second quarter earnings threw a 9.4% positive earnings
surprise. Over the past four quarters this Zacks Rank #2 (Buy)
health insurer has delivered an average positive surprise of
On Jul 30, Aetna reported second-quarter 2013 earnings of
$1.52 per share, surpassing the Zacks Consensus Estimate by 13
cents per share. Earnings also increased 16% year over year. The
earnings upside came on the back of earnings accretion from
Coventry acquisition, strong underlying performance in Commercial
business and membership growth.
Aetna has also been witnessing rising earnings estimates. Over
the last 7 days, 6 out of 14 estimates moved north, pushing the
Zacks Consensus Estimate for 2013 by 0.7% to $5.88. The same for
2014 rose 0.3% to $6.37 as 4 of 14 estimates were raised over the
same time frame. The expected long term earnings growth is
Aetna's business execution over the last few years has been
excellent. While performance has been strong across the board a
stand-out area is its organic and acquisition-fueled growth.
Aetna has made huge investment in technology upgradation.
Aetna concluded the acquisition of Coventry in May. The
acquisition enhances the company's Medicaid footprint, gives it
more credibility, and better positions the company for the
enormous Medicaid RFP expansion and dual growth
It has also made a number of acquisitions in its Commercial
business over the past 2-3 years. At the same time, the company
is witnessing an increase in membership
Aetna is aggressively forming Accountable Care Organizations
to generate incremental revenues. We also have a growing optimism
for international growth opportunities at Aetna.
A strong balance sheet with an efficient capital management
program provides inherent strength.
Other Stocks to Consider
Molina Healthcare, Inc.
Health Net, Inc.
) all with Zacks Rank #2 (Buy) are worth considering.
AETNA INC-NEW (AET): Free Stock Analysis
HEALTH NET INC (HNT): Free Stock Analysis
MOLINA HLTHCR (MOH): Free Stock Analysis
WELLPOINT INC (WLP): Free Stock Analysis
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