Jun 21, 2013
, we upgraded our recommendation on the shares of
) to Outperform from Neutral as we gain increased confidence
about the company's operations.
Aetna has been performing strongly over the past several
quarters and we expect the company to continue performing well
going forward, backed by the growth in Medicaid and Medicare
network segments, fast-growing health services segment, and an
expanding provider network.
Aetna's execution over the last few years has been excellent.
While performance has been strong across the board, a stand-out
area is the organic and acquisition-fueled growth.
Aetna has made huge investment in technology upgradation as
well as acquisition.
Aetna recently concluded the acquisition of Coventry. The
acquisition enhances the company's Medicaid footprint, gives it
more credibility, and positions the company better 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.
Additionally, Aetna is aggressively forming Accountable Care
Organizations to generate incremental revenues.
We also have a growing optimism for international growth
opportunities at Aetna. The company is actively entering foreign
markets. It is targeting Asian markets like India and China both
of which present huge potential for growth.
A strong balance sheet with an efficient capital management
program provides inherent strength. The company is also
witnessing an increase in membership.
Our optimism is echoed in the estimate revisions as
well. Over the last 60 days, 4 of the 9 estimates moved north,
pushing up the Zacks Consensus Estimate for 2013 by 5.5% to
$5.79. Estimates for 2014 rose 8.6% to $6.31 as 9 of 11 estimates
were raised over the same time frame. The expected long term
earnings growth is 11.5%.
Other Stocks to Consider
Other players under our coverage,
Molina Healthcare, Inc.
) with Zacks Rank # 1 (Strong Buy),
Health Net, Inc.
) 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
To read this article on Zacks.com click here.