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Cigna's (CI) Earnings View Reaffirmation Reflects Solid Business Profile

Sapna Bagaria

Cigna Corp. CI has reiterated its 2020 earnings guidance of $18-$18.6 as well as its consolidated adjusted revenue view in the range of $154-$156 billion. It also kept intact its 2021 adjusted EPS outlook of $20-$21.

The maintenance of this projection reflects that the negative impact of COVID-19 will be offset by the company’s business growth.

Cigna by virtue of its diversified business, which includes health insurance, and a vast pharmacy benefit management business, gained from the acquisition of Express Scripts, emerge as a prolific company. This strengthens its position to weather the continuing tough business environment, which emanated from the coronavirus outbreak.

In the first quarter of 2020, management disclosed that the rising unemployment scenario is causing attrition among its commercial customers, both in the Integrated Medical business and Health Service business, apart from weighing on its Group Disability business.

On the medical cost front, the company expects the impact of elevated COVID-19 claims cost to be offset by lower medical costs from deferred surgical procedures.

However, to remain ahead of its industry, the company is making investments in virtual healthcare, which gathered steam amid COVID-19-induced remote monitoring of health conditions. To this end, the company also partnered with virtual healthcare service providers, namely MDLIVE and Buoy Health.

Management on the first-quarter earnings conference call stated that it continues to expect strong volume growth this year in Pharmacy Services, Specialty Pharmacy Care and Medicare Advantage alongside expense efficiencies.

The company has also been parking money in innovation and digital capabilities to better  serve its customers and clients.

Health insurers via their defensive business profiles are better placed  even in the COVID-19-led weak economic conditions, which caused many businesses to suffer huge losses. Per a last month’s report by Moody’s Investors Service, most U.S. health insurers will reap profits despite the Covid-19 pandemic.

In the past three months, the stock has gained 7.8% compared with its industry’s increase of 9.8%. Some other players in the same space are UnitedHealth Group Inc. UNH, Anthem Inc. ANTM and Humana Inc. HUM, which have rallied 16.6%, 10.5% and 23.6%, respectively, over the same time frame.

 

Cigna carries a Zacks Rank #3 (Hold).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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