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Cigna Banks on Diversified Business, Solid Capital Position

Zacks Equity Research

Cigna Corp. CI seems well-poised for growth on the back of its vast and diversified business profile, a solid balance sheet and strong operating performance.

The company is dependent on its four main growth platforms, namely Health Services, Commercial, Government and International.

In its Health Services segment, the company is making concerted efforts to enhance its pharmacy and other services, and continue expanding its Accredo specialty pharmacy.

In the Commercial segment, the company is witnessing a deep penetration in the Select and Middle markets.

In its Government business, Cigna is concentrating on the PPO product expansion and accelerating growth with the acquisition of Express Scripts. The company expects average annual customer growth of 10-15% through 2025 in its Medicare Advantage business, which forms a major chunk of the company’s Government operations.

On the International business front, which is spread across more than 30 countries, Cigna is strengthening its foothold in the existing geographies. It is also innovating solutions and exploring new markets.

While Cigna is focusing on reaping benefits from these four strategic areas, it is also streamlining its business operations by shedding the poorly faring businesses.  In this vein, the company is on track to sell its Group Disability and Life business, which is going to be completed soon. Proceeds will be deployed for share repurchase and debt repayment in 2020.

The company also has significant financial flexibility and has been generating positive cash flows since many years, which enables reinvestment in business, strategic mergers and acquisitions and capital returns to its shareholders via dividend payments and share buybacks. For 2020, the company expects more than $7.5 billion of cash flow from operations, reflecting the strong capital efficiency of its well-performing businesses.

These strategic efforts will lead to the company’s revenue and earnings growth. For 2020, consolidated adjusted income from operations is expected to be $6.8-$7 billion or $18-$18.60 per share. This suggests growth in the range of 9-13% from the 2019 baseline earnings. For 2021, the company targets an EPS of $20-$21. For the ongoing year, the company expects consolidated adjusted revenues in the $154-$156 billion band, indicating growth of 10-11% from the year-ago quarter’s reported figure.

Year to date, the stock has lost 9.6% compared with its industry’s decline of 0.1%.

Other stocks worth considering from the same space include Humana Inc. HUM, UnitedHealth Group Inc. UNH and Molina Healthcare Inc. MOH, which have gained 14.5%, 8.5% and 39.5%, respectively, over the same time period.

Cigna carries a Zacks Rank #3 (Hold), currently. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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UnitedHealth Group Incorporated (UNH) : Free Stock Analysis Report
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