U.S. health insurer,
) has reaffirmed its previously issued operating guidance.
AETNA INC-NEW (AET): Free Stock Analysis
UNITEDHEALTH GP (UNH): Free Stock Analysis
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Aetna continues to see 2012 EPS of $5.10; for 2013 earnings per
share is a minimum of $5.40. The Zacks Consensus Estimates
earnings are $5.15 and $5.51 per share for 2013 and 2013
Revenues for the full-year 2012 are projected to be approximately
$35.5 billion, while full-year 2013 revenues are projected to
grow approximately 9% compared with 2012.
Aetna, the third-largest U.S. health insurer by membership,
expects 2012 year-end membership of 18.2 million, with enrollment
remaining unchanged through the first quarter of 2013. By the end
of 2013, membership is expected to reach about 18.4 million.
With respect to medical costs trend, Aetna maintains its
full-year 2012 Commercial medical cost trend projection of 6.5%
with the same level to be maintained in 2013.
The company also provided a status update on its pending Coventry
Health Care, Inc.'s acquisition. As of January 4, 2013, Aetna had
received 17 out of the 21 state approvals for the proposed
Aetna continues to believe that 2013 operating fundamentals will
be challenged to some extent by increasing medical costs and weak
enrollment. Health insurers overall are becoming very cautious as
the year 2013 is expected to present a number of headwinds -
regulatory as well as economic. However, in our point of
view, the company is being overly precautious in providing its
earnings guidance. It is following the trend of peer
UnitedHealth Group Inc.
), which also provided a narrow outlook for 2013. It expects 2013
earnings estimates in the range of $5.25-$5.50 per share, on
revenue of $123-$124 billion.
Despite the moderate guidance, we believe that the company will
surprise investors on the back of a number of tailwinds. These
include positive accretion from the Coventry acquisition; growing
Medicare and Medicaid; share buyback; with earlier deals made in
2011 adding incremental earnings. These in turn will overshadow
headwinds such as a weak commercial membership growth, low
investment income, higher expenses due to investments in the
Accountable Care Solutions and exchanges.
Till we get more shades on Aetna's 2013 earnings we would
continue maintaining our long-term 'Neutral' recommendation on
the shares. The stock currently retains a Zacks #3 Rank