On Apr 3, 2013, shares of Aetna Inc. (AET) hit a 52-week high of $55.62.
Aetna completed the sale of its Missouri Medicaid business, called Missouri Care, to WellCare Health Plans, Inc. (WCG) as a part of proposed acquisition of Coventry Health Care, Inc. (CVH). The deal is a net positive for Aetna since in exchange of foregoing 100,000, members served by Missouri Care, Aetna will gain access to 250,000 members served by Health Care USA.
Aetna also announced a four-year reinsurance agreement with Vitality Re IV Limited, a newly-formed special purpose insurance company based in the Cayman Islands in January. The transaction is expected to release capital held with respect to Aetna's commercial group health business, thereby effectively meeting the risk-based capital requirements set by state regulators.
Also, to return more value to shareholders, in February, the Board authorized Aetna to buyback additional $750 million shares.
Aetnais aggressively looking to generate incremental fee revenues from Accountable Care Solutions (ACO). On Mar 11, 2013, Aetna announced the formation of an ACO with ProHealth Physicians, Inc. Previously, in January, the company agreed to form an ACO with Texas Health Resources.
Previously, Aetna reported positive earnings surprise in 2 of the 4 quarters in 2012, with an average beat of 3.53%. The Zacks Consensus Estimate for the company’s first quarter of 2013 is currently pegged at $1.40 per share, representing a year-over-year increase of 4.64%. Aetna guided FY13 operating earnings per share to a minimum of $5.40.
The valuation of Aetna looks attractive. The shares are trading at a 7.4% premium to peer group average on a price-to-book value basis and at a discount of 16.1% on a price-to-earnings. The return on equity of 16.9% is 37.4% higher than the peer group average of 12.3%.
Aetna carries a Zacks Rank #2 (Buy). Another healthcare stock worth considering is Health Net Inc. (HNT) – Zacks Rank #1 (Strong Buy).
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