On Feb 24, shares of
) hit a new 52-week high of $72.43 per share. The momentum in the
share price was driven by a strong fourth-quarter earnings
performance at the company despite numerous headwinds faced in
connection with the Affordable Care Act. The 1-year return
from the stock came in at 50.9%, much ahead of the S&P's
return of 21.9%.
Aetna's fourth quarter earnings per share (EPS) were $1.34 ,
up 43% year over year, driven by earnings accretion from the
Coventry acquisition as well as higher underwriting margins
primarily in the Commercial business, partially offset by lower
underwriting margins in the Medicare business. The company
delivered positive surprise in 2 of last 4 quarters with an
average of 3.8%.
Aetna's total revenue for the reported quarter rose
significantly by 33% year over year to $13.1 billion, led by
higher Health Care premiums from the acquisition of Coventry,
increased Medicare membership and underlying Commercial Insured
premium yield growth. Reported revenues were in line with the
Zacks Consensus Estimate.
Aetna ended the year 2013 with nearly 22.2 million medical
members, representing its seventh sequential quarter of medical
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.
Moreover, Aetna's Coventry acquisition is turning out to be
more accretive than estimated, promising a healthy contribution
to earnings going ahead. The company is also working toward
expanding its high-margin international business.
Subsequently, the stock has witnessed an upward revision in
estimates. Over the past 30 days, EPS estimates for first-quarter
2014 moved north by 3.2% to $1.60 as 11 of the 16 analysts pulled
up their numbers. For full-year 2014, the same increased 2.6% to
$6.40 per share as 6 of the 14 analysts hauled up their
The company is also building on its Accountable Care
Organization strategy to generate incremental revenues.
Aetna should benefit from growth in the Medicaid and Medicare
divisions - the fast-growing health services segments at the
company, and an expanding provider network.
A strong balance sheet with low leverage is yet another
However, Aetna expects to lose money in 2014 from its business
in health insurance exchange as the newly signed members mostly
belong to older, higher cost population. Other players such as
UnitedHealth Group Inc.
) are also taking a cautious approach toward the health insurance
Aetna presently carries a Zacks Rank #2 (Buy).
AETNA INC-NEW (AET): Free Stock Analysis
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UNITEDHEALTH GP (UNH): Free Stock Analysis
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