Will Cigna (CI) Beat Q2 Earnings on ACO & Global Business? - Analyst Blog

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We expect multiline insurer Cigna Corp. ( CI ) to beat expectations when it reports second-quarter 2014 results before the opening bell on Jul 31

Why a Likely Positive Surprise?

Our proven model shows that Cigna is likely to beat earnings because it has the right combination of key factors.


Zacks ESP:  Earnings ESP , which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is +1.08%. This is a meaningful and leading indicator of a likely positive earnings surprise for this company.

Zacks Rank: Cigna carries a Zacks Rank #3 (Hold). The stocks with Zacks Ranks  #1, 2 and 3 have a significantly higher chance of beating earnings. The Sell-rated stocks (#4 and 5) should never be considered going into an earnings announcement.

The combination of Cigna's Zacks Rank #3 (Hold) and +1.1% ESP make us confident of an earnings beat on Jul 31.

What is Driving Better-than-Expected Earnings?

We expect Cigna's earnings to see continued momentum in the international segment. The expat business, where Cigna is the market leader having presence in 30 countries is also expected to continue to see growth thanks to increasing globalization.

During the quarter, Cigna reached its Accountable Care Organization (ACO) goal for 2014, which will help in reducing its medical cost and aid in bottom line growth.

However, the impact of industry fees as mandated by Health Care Reform will increase operating expense and erode earnings. Moreover, increase in medical utilization as expected will increase the company's claim cost thereby restricting earnings growth.  

Cigna's use of capital for share buyback will provide an extra cover to earnings.  

In the last quarter, this health insurer delivered a 19.6% positive earnings surprise. The average beat for the trailing four quarters is 10.5%.

Other Stocks to Consider

Here are some companies in the health care space worth considering as our model shows they have the right combination of elements to post an earnings beat this quarter.

Wright Medical Group Inc. ( WMGI ) has an Earnings ESP of +8.9% and carries a Zacks Rank #2 (Buy).

Genomic Health Inc. ( GHDX ) has an Earnings ESP of +14.3% and carries a Zacks Rank #3.

Cardinal Health, Inc. ( CAH ) has an Earnings ESP of +1.2% and carries a Zacks Rank #3.


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CIGNA CORP (CI): Free Stock Analysis Report

WRIGHT MEDICAL (WMGI): Free Stock Analysis Report

CARDINAL HEALTH (CAH): Free Stock Analysis Report

GENOMIC HEALTH (GHDX): 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 , Earnings , Stocks

Referenced Stocks: CI , WMGI , CAH , GHDX

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