Cigna (CI) to Report Q4 Earnings: Can Rising Expenses Hurt?

The Cigna Group CI is set to report its fourth-quarter 2023 results on Feb 2, before the opening bell. Increased pharmacy revenues and net investment income in the quarter are likely to be partially undone by higher benefits and expenses.

Where Do the Estimates Stand?

The Zacks Consensus Estimate for fourth-quarter earnings per share of $6.52 suggests a 31.5% increase from the prior-year figure of $4.96. The consensus mark remained stable over the past week. The consensus estimate for fourth-quarter revenues of $48.8 billion indicates a 6.7% increase from the year-ago reported figure.

Cigna beat the consensus estimate for earnings in all the prior four quarters, with the average being 2.5%. This is depicted in the graph below:

Cigna Group Price and EPS Surprise

Cigna Group Price and EPS Surprise

Cigna Group price-eps-surprise | Cigna Group Quote

Before we get into what to expect for the to-be-reported quarter in detail, it’s worth taking a look at CI’s previous-quarter performance first.

Q3 Earnings Rewind

In the last reported quarter, the global health company’s adjusted earnings per share of $6.77 beat the Zacks Consensus Estimate by 1.7%, supported by the solid performance of the Evernorth Health Services and Cigna Healthcare businesses, partially offset by an elevated expense level, resulting from higher pharmacy and other costs.

Now, let’s see how things have shaped up before the fourth-quarter earnings announcement.

Q4 Factors to Note

Cigna's fourth-quarter results are expected to be positively influenced by enhanced performances in the Evernorth and Cigna Healthcare segments. The company is expected to have gained from an expanding customer base, especially in the Middle Market space and the growth in specialty pharmacy services during the quarter under review.

Both the Zacks Consensus Estimate and our model estimate for pharmacy revenues suggest a nearly 4% rise from the year-ago quarter’s actuals. Also, the consensus mark for fees and other revenues indicates 15.6% year-over-year growth, whereas our estimate suggests an almost 10% increase.

The consensus mark for Evernorth’s revenues indicates a 6.2% year-over-year jump, whereas our model predicts a more than 5% increase. Both the Zacks Consensus Estimate and our estimate for total medical customers signal a nearly 9% increase from the year-ago period’s reported number.

Moreover, the Zacks Consensus Estimate for net investment income suggests nearly 38% growth from the year-ago period. Both the consensus mark and our estimate for the fourth quarter medical care ratio indicate a 30 basis points year-over-year improvement. The factors stated above are likely to have positioned the company for year-over-year growth in the fourth quarter.

However, we expect total Benefits and Expenses in the quarter to have increased more than 5% year over year due to higher pharmacy and other service costs, medical costs and other benefit expenses and SG&A costs, partially offsetting the positives and making an earnings beat uncertain. We expect pharmacy and other service costs to rise above $33.3 billion in the fourth quarter.

Earnings Whispers

Our proven model does not conclusively predict an earnings beat for Cigna this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. That is not the case here, as you will see below.

Earnings ESP: The company’s Earnings ESP is -0.33%. This is because the Most Accurate Estimate currently stands at $6.50 per share, lower than the Zacks Consensus Estimate of $6.52.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Cigna currently carries a Zacks Rank #3.

Stocks to Consider

While an earnings beat looks uncertain for Cigna, here are some companies from the broader Medical space that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this time around:

GoodRx Holdings, Inc. GDRX has an Earnings ESP of +15.91% and is a Zacks #2 Ranked player. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for GoodRx’s bottom line for the to-be-reported quarter is pegged at 7 cents per share, which has remained stable over the past week. The consensus mark for GDRX’s revenues is pegged at $193.3 million, signaling 5% year-over-year growth.

Globus Medical, Inc. GMED has an Earnings ESP of +1.85% and a Zacks Rank #3.

The Zacks Consensus Estimate for Globus Medical’s bottom line for the to-be-reported quarter is pegged at 59 cents per share, which has witnessed four upward revisions over the past month against none in the opposite direction. GMED beat earnings estimates in each of the past four quarters, with an average surprise of 5.4%.

Arvinas, Inc. ARVN has an Earnings ESP of +17.19% and is a Zacks #2 Ranked player.

The Zacks Consensus Estimate for Arvinas’ earnings per share for the to-be-reported quarter indicates an 18% year-over-year improvement. ARVN beat earnings estimates in two of the past four quarters and missed on the other occasions.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.

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Each was handpicked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2023. Previous recommendations have soared +143.0%, +175.9%, +498.3% and +673.0%.

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Cigna Group (CI) : Free Stock Analysis Report

Globus Medical, Inc. (GMED) : Free Stock Analysis Report

Arvinas, Inc. (ARVN) : Free Stock Analysis Report

GoodRx Holdings, Inc. (GDRX) : 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 Nasdaq, Inc.

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