) expects its 2013 earnings per share to be at least $5.40, below
the Zacks Consensus Estimate of $5.52 per share. The conservative
guidance from the company comes on the back of increasing medical
costs and weak enrollment.
AETNA INC-NEW (AET): Free Stock Analysis
UNITEDHEALTH GP (UNH): Free Stock Analysis
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Based on the fourth quarter 2012 performance till date, including
actual results of October and November 2012, Aetna reiterated its
earlier full-year 2012 EPS expectation of $5.10. The Zacks
Consensus Estimate for 2012 is currently pegged at $5.15,
modestly higher than the company's guidance.
Revenues for the full-year 2012 are projected to be approximately
$35.5 billion, and full-year 2013 revenues are projected to grow
approximately 9% compared with 2012.
The guidance excludes the positive accretion anticipated from the
Coventry acquisition, which is likely to close next year.
Aetna has been benefiting from low medical utilization for the
last couple of years. However, it expects that the trend will
reverse to normal levels resulting in higher medical costs.
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.
The company also estimates 2012 share buybacks to total $1.4
Health insurers 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 last month. 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 -
positive accretion from the Coventry acquisition; growing
Medicare and Medicaid; share buyback; earlier deals made in 2011
adding incremental earnings, which 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, which
translates into a short-term Hold rating.