Cigna Upped to Strong Buy - Analyst Blog


On Jan 7, Zacks Investment Research upgraded CIGNA Corp. ( CI ) to a Zacks Rank #1 (Strong Buy).

Why the Upgrade?

Cigna has been witnessing rising earnings estimates on the back of strong results, an enhanced guidance for 2013 and efforts taken to boost its operating profile. This health insurer has delivered positive earnings surprises in each of the past four quarters with an average beat of 13.6%.

Cigna boasts superior operating performance, along with a diversified business profile. The company has forayed into the much sought-after business of serving the senior population with the acquisition of HealthSpring.

Cigna has improved its business profile by entering into reinsurance transaction with Berkshire Hathaway, Inc. (BRK.A), ( BRK.B ).

Cigna has also made a move forward by improving its debt profile. It has brought down its leverage ratio that traditionally stayed around 45%, to about 41% as of Sep 30, 2013. Steps taken by the company such as freezing of pension plans and making higher contribution to reduce the unfunded liability has bettered the company's leverage ratio.

Cigna also remains more reform-resistant than its peers, primarily because 85% of its U.S. healthcare business comprises administrative services only (ASO). This limits the company's exposure to unanticipated increase in medical utilization.

Other positives are limited exposure to risk associated with health insurance exchanges, a well-diversified product profile, and a growing membership base along with niche market presence in the U.S.

The Zacks Consensus Estimate for 2014 inched up 0.6% to $7.31 per share, translating into year-over-year growth of 6.6%. The expected long-term earnings growth rate of the stock is 11.2%.

The company is scheduled to release fourth quarter and full-year 2013 earnings on Feb 7. The Zacks Consensus Estimate for earnings is currently pegged at $1.48 per share for the fourth quarter and at $6.86 per share for 2013.

Other Stocks to Consider

Other insurance stocks worth considering include American International Group Inc. ( AIG ) and CNO Financial Group, Inc. ( CNO ). Both these carry the same Zacks Rank as Cigna.

AMER INTL GRP (AIG): Free Stock Analysis Report

BERKSHIRE HTH-B (BRK.B): Free Stock Analysis Report

CIGNA CORP (CI): Free Stock Analysis Report

CNO FINL GRP (CNO): Free Stock Analysis Report

To read this article on click here.

Zacks Investment Research

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: AIG , CI , CNO

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