On May 30, 2013, the shares of
) hit a 52-week high of $62.76. Aetna registered positive
earnings surprises in three of the last four quarters, with an
average beat of 6.77%.
AETNA INC-NEW (AET): Free Stock Analysis
CENTENE CORP (CNC): Free Stock Analysis
HEALTH NET INC (HNT): Free Stock Analysis
MOLINA HLTHCR (MOH): Free Stock Analysis
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The first quarter 2013 results of the U.S. health insurer
surpassed our expectation. The outperformance was particularly
driven by its diversified business model. On top of it the
company was able to increase its membership for the fourth
consecutive quarter thanks to strong growth in its Medicare
Aetna continued its good work by deciding to form an Accountable
Care Organization (ACO) with Riverside Health System. This is in
sync with the company's goal of improving the safety and quality
of patient care and making health care more affordable.
Besides expanding its international footprint, Aetna has formed
an alliance with Tawuniya, the company for cooperative insurance
in Saudi Arabia. Aetna will offer health care benefits and
services to residents of Saudi Arabia.
Aetna projected earnings for 2013 in the range of $5.70 to $5.85
per share, up from the previous projection of $5.50 to $5.60 per
share. The strong performance in the first quarter and completion
of acquisition of Coventry Health Care were instrumental in
raising the guidance.
We expect long-term earnings growth of 11.50% on the back of
sales growth of 3.28%. The Zacks Consensus Estimate for 2013 is
$5.78, reflecting year-over-year growth of 12.71%.
The strong financial position of Aetna enables it to reward its
shareholders through dividend payments and share repurchases. In
the first quarter, the company repurchased 3.7 million shares for
nearly $184.1 million and paid dividends worth $66 million.
The present valuation reflects that the company's shares are
trading at a discount to its peers. The shares of Aetna currently
trade at 10.80x 12-month forward earnings, a 6.1% discount to the
peer group average of 11.51x. Its ROE of 16.9 is higher than the
peer group average of 12.5.
Aetna currently retains a Zacks Rank #2 (Buy). Other companies in
the industry which are worth considering are
Health Net Inc.
Molina Healthcare Inc
). Centene and Health Net presently have a Zacks Rank #2 (Buy)
while Healthcare has a Zacks Rank #1 (Strong Buy).