On Nov 27, 2013, we downgraded our recommendation on
) to Neutral from Outperform; following its third quarter
earnings miss, with a 1.96% negative earnings surprise. The
health insurer presently carries a Zacks Rank #3 (Hold).
On Oct 29, 2013, Aetna reported third-quarter 2013 earnings of
$1.50 per share, down 3 cents per share from the Zacks Consensus
Estimate. Earnings were also down 3.2% year over year.
Aetna has also witnessed a decline in earnings estimate since the
earnings release. The Zacks Consensus Estimate for 2013 went down
by 0.3% to $5.87 per share as 5 out of the 17 analysts pulled
down their estimates over the last 30 days. The same for 2014
went down by 2.4% as 11 out of the 18 analysts took a similar
During the third quarter conference call management sounded
cautious about its 2014 earnings outlook as it announced that the
worst-case scenario for 2014 is that per-share earnings from
operations will remain flat, compared with 2013 earnings.
Some of the headwinds facing Aetna in 2014 are Medicare Advantage
reimbursement cuts and the industry premium tax.
The company is also expecting margin pressure in experience-rated
group commercial and an uptick in the cost trend.
The low interest rate environment is expected to continue into
2014, which would negatively impact Aetna's investment income
Nevertheless, tailwinds such as incremental Coventry accretion,
fixed cost leverage and cost management; expanding international
business, expansion of its Accountable Care Organization strategy
and share repurchases will aid earnings.
Other stocks to Consider
Other better ranked stocks
), all with Zacks Rank #2 (Buy) are worth considering.
AETNA INC-NEW (AET): Free Stock Analysis
ASSURANT INC (AIZ): Free Stock Analysis
CIGNA CORP (CI): Free Stock Analysis Report
CENTENE CORP (CNC): Free Stock Analysis
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