Aetna's Shares Hit 52-Week High - Analyst Blog


On May 30, 2013, the shares of Aetna Inc. ( AET ) 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%.

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 business.

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 Centene Corp. ( CNC ), Health Net Inc. ( HNT ) and Molina Healthcare Inc . ( MOH ). Centene and Health Net presently have a Zacks Rank #2 (Buy) while Healthcare has a Zacks Rank #1 (Strong Buy).

AETNA INC-NEW (AET): Free Stock Analysis Report

CENTENE CORP (CNC): Free Stock Analysis Report

HEALTH NET INC (HNT): Free Stock Analysis Report

MOLINA HLTHCR (MOH): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Business , Stocks

Referenced Stocks: ACO , AET , CNC , HNT , MOH

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