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Aetna Gives 2014 Earnings Est, Affirms 2013

U.S. health insurer, Aetna Inc. (AET) provided an outlook about its 2014 earnings and at the same time reaffirmed its 2013 earnings.

Aetna maintained its earlier issued guidance of $5.80–$5.90 earnings per share for full year 2013. Adjusted earnings, which exclude the effect of after-tax amortization of other acquired intangible assets, is expected at $6.20 to $6.30 per share. The Zacks Consensus Estimate for full year 2013 earnings stands at $5.87 per share.

Operating revenue for the full-year 2013 is projected to be approximately $47 billion, almost in line with the Zacks Consensus Estimate of $47.1 billion.

For the full year 2014, the company said that the minimum earnings will be $6.25, which is higher when compared with the Zacks Consensus Estimate of $6.21. Aetna did not provide any upper range to the earnings projection, signifying uncertainty about how the business would perform, given a host of factors related to the Affordable Care Act that will become effective in 2014. Operating revenue of $53 billion is expected to be lower than the Zacks Consensus Estimate of $55 billion.

Aetna expects that funding cuts in Medicare Advantage plans will hurt its profit in 2014. However, tightening of Commercial pricing will help improve profit.

Last week another health insurer UnitedHealth Group Inc. (UNH) narrowed its 2014 earnings outlook. It announced 2014 earnings in the range of $5.40–$5.60 per share, which remained below the Zacks Consensus Estimate of $5.66 per share. The insurer maintained a limited near-term upside to 2014 earnings, reflecting headwinds related to ACA.

Another player Humana Inc. (HUM) expects a fall in earnings next year, led by spending on the new health exchanges and on the Medicaid program.

U.S. health insurers are cautious of new mandates related to the ACA that will become effective in 2014, that would dent earnings. Aetna is better placed than others, since the Coventry acquisition is turning out to be more accretive than estimated, which will contribute to earnings. Moreover the company is also growing international business which provides higher margin.

Aetna retains a Zacks Rank #4 (Sell).

A better ranked stock Centene Corp. (CNC) with Zacks Rank # 2 (Buy) is worth considering.

Read the Full Research Report on AET
Read the Full Research Report on HUM
Read the Full Research Report on UNH
Read the Full Research Report on CNC


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