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Cigna Corp. (CI) Up 7.8% in 3 Months: More Room to Grow?

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·4 min read
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Cigna Corporation’s CI shares have jumped 7.8% in the past three months, thanks to its capital generating prowess as the demand for healthcare-related plans keeps rising. The company has been gaining from an active inorganic growth strategy.

Based in Bloomfield, CT, Cigna provides insurance products and services to a wide range of clients. It offers multiple healthcare programs in the United States. CI has a market cap of $77.4 billion.

Can It Retain Momentum?

The answer is yes and before we get into the details, let us show you how its estimates for full-year 2022 stand. The Zacks Consensus Estimate for Cigna’s 2022 earnings is pegged at $22.51 per share, indicating a 10% rise from $20.47 a year ago. It has witnessed five upward estimate revisions in the past 60 days against one movement in the opposite direction. The company beat earnings estimates in each of the last four quarters, with an average of 6%.

Cigna Corporation Price and EPS Surprise

Cigna Corporation Price and EPS Surprise
Cigna Corporation Price and EPS Surprise

Cigna Corporation price-eps-surprise | Cigna Corporation Quote

The consensus estimate for 2022 revenues stands at $179.1 billion, signaling a 2.9% year-over-year rise.

Now let’s delve into what’s driving the Zacks Rank #3 (Hold) stock.

Cigna is witnessing continuous membership growth, thanks to its diversified product portfolio, vast agent network and superior services. CI’s strong Government business including Medicare Advantage is a major positive. It ended last year with 17.1 million medical members, up 2.6% year over year. It expects the number to further grow by 575,000 this year.

CI’s prudent acquisition moves are boosting inorganic growth. Buyouts like Express Scripts, OnePath Life Insurance and others are praiseworthy. Its inorganic growth strategy has helped the company in growing its geographical footprint. These moves are helping the company to consistently increase the top line. Revenues improved 9% year over year for 2021. CI expects adjusted revenues for 2022 at a minimum of $177 billion, indicating an increase from the 2021 level of $174.1 billion. The company is on track to achieve 6-8% average annual adjusted revenue growth in the long term.

CI expects long-term adjusted earnings to witness 6-8% average annual growth. Coupled with expected contribution from accretive capital deployments, annual adjusted earnings per share are expected to grow 10-13% in the long term. With the proportion of older persons in the population rapidly growing, demand for the company’s products is likely to increase.

CI’s plan to streamline its portfolio through divesting its life, accident and supplemental benefits businesses to insurer Chubb for $5.75 billion will enable the former to focus on its more profitable global health services portfolio.

Cigna has a strong shareholder value-boosting program in place. Between Jan 1 and Feb 23 this year, it repurchased shares worth around $1.2 billion. CI intends to buy back more than $7 billion worth of shares in 2022. It increased the share buyback program by $6 billion last month to a total of $10 billion. Also, CI intends to distribute dividends worth around $1.4 billion in 2022. It hiked quarterly dividend per share by 12%.

Risks

Despite the upside potential, there are a few factors that are holding back the stock’s growth. A debt-laden balance sheet and rising operating expenses are concerning. Also, for the trailing 12-month period, free cash flow declined 34.8% to $6 billion. Nevertheless, we believe that a systematic and strategic plan of action will drive long-term growth.

Key Picks

Some better-ranked stocks in the Insurance-Multiline space include CNO Financial Group, Inc. CNO, Horace Mann Educators Corporation HMN and Old Republic International Corporation ORI, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

CNO Financial’s cost-reduction efforts, investments in cutting-edge technology and strategic initiatives are tailwinds. Headquartered in Carmel, IN, CNO Financial’s bottom-line estimates for 2022 have improved 3% in the past 60 days. CNO beat earnings estimates in each of the last four quarters, with an average of 25.5%.

Horace Mann is one of the largest multi-line financial services companies serving the U.S. educator market. The Zacks Consensus Estimate for HMN’s 2022 bottom line has improved 8.4% in the past 60 days. Horace Mann beat earnings estimates in each of the last four quarters, with an average of 22.8%.

Old Republic’s General Insurance business should benefit from improved risk selection, pricing precision and increased use of analytics. The Zacks Consensus Estimate for ORI’s full-year bottom line has improved 3.7% in the past 60 days. Headquartered in Chicago, IL, Old Republic beat earnings estimates in each of the last four quarters, with an average of 38.7%.


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