On June 4, Zacks Investment Research upgraded U.S. health insurer Aetna Inc. (AET) to Zacks Rank #2 (Buy) from Zacks Rank #3 (Hold).
Why the Upgrade?
Aetna has been enjoying rising estimate revisions in the past 60 days with 10 of 15 estimates revised upward. This positive estimate revisions led to a 1.9% rise in the Zacks Consensus Estimate to $6.52 per share for 2014.The same for 2015 rose 1.1% to $7.20 as 9 out of 16 estimates moved north.
Unfazed by numerous challenges related to the Health Care Reform Act that stifled the health insurance industry, this insurer has been performing strongly. Aetna's stock has in fact rallied 16.4% year to date.
Aetna churned out first-quarter earnings of $1.98 per share, zooming past the Zacks Consensus Estimate of $1.56 per share. Earnings also grew 27% year over year. Better-than-expected earnings came on the back of higher underwriting margins in the Health Care business and accretion from the Coventry acquisition.
Buoyed by solid first-quarter results and expectations of continued momentum, management increased its previously provided outlook for the full year. Aetna now expects to earn in the range of $6.35 to $6.55. The Zacks Consensus Estimate lies near the top end of the guidance. The company had earlier announced a minimum of $6.25 per share in earnings for 2014. Top line is expected to fall in the range of $56 billion to $57 billion, which is higher than the previous expectation of $54 billion.
Aetna is one of the biggest health insurers in the U.S. which has proactively adapted to the changing industry landscape. Extensive investments in products and technology, with an intention to extend its core health business and capitalize on exciting new consumer and provider opportunities emerging in the marketplace will certainly help it to stay it ahead of its ilk.
Among other players, Select Medical Holdings Corporation (SEM) and Triple-S Management Corporation (GTS) with a Zacks Rank #1 (Strong Buy) and WellCare Health Plans, Inc. (WCG) with a Zacks Rank #2 are also worth considering.