Why Is Cigna (CI) Up 7.4% Since the Last Earnings Report?

It has been about a month since the last earnings report for Cigna Corporation CI. Shares have added about 7.4% in that time frame, outperforming the market.

Will the recent positive trend continue leading up to the stock's next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Cigna Q2 Earnings Beat Estimates

Cigna Corp. reported second-quarter 2017 operating net earnings of $2.91 per share, comfortably beating the Zacks Consensus Estimate of $2.48 and increasing 47% year over year.

The earnings beat reflected strong contribution from each of the company’s business segments.

Other Details

Cigna posted revenues of $10.3 billion, which surpassed the Zacks Consensus Estimate of $9.98 billion.  Revenues grew 4% year over year.
Total benefits and expenses of $9.2 billion remained almost unchanged year over year.

Operating expense ratio of 19.9% improved 100 basis points year over year.
The company’s medical enrollment grew to 15.7 million from 15.1 million in the year-ago quarter, driven by organic growth in all of its commercial market segments.

Quarterly Review by Segment

Global Health Care: Premiums and fees from the segment increased 3% year over year to $7.18 billion. The improvement was driven by customer growth and specialty contributions in the company’s Commercial employer group. However, the upside was partially offset by reductions in Government customers.

Adjusted operating earnings were $591 million, up 21.6% year over year on strong medical and specialty results, and continued effective medical cost.

Global Supplemental Benefits: Premiums and fees from this segment climbed 14% year over year to $914 million on the back of continued business growth.

Adjusted operating income increased 26.5% year over year to $105 million, reflecting business growth and strong operating expense management.

Global Disability and Life: Premiums and fees also increased 1% year over year to $1.02 billion, primarily driven by consistent business growth across disability and life products.

The segment reported adjusted operating income of $83 million against a loss of $12 million in the year-ago quarter, reflecting continued stable life results and further improvement in disability performance.

Financial Position

Cash and marketable investments were $2.2 billion at Jun 30, 2017 and $2.8 billion at year-end 2016.

Cigna’s long-term debt of $4.6 billion as of Jun 30, 2017 declined from $4.8 billion as of Dec 31, 2016.

Year to date, the company has repurchased 7.7 million shares of common stock for approximately $1.25 billion.

2017 Guidance

Cigna pulled up its 2017 earnings guidance after strong results. It expects adjusted income from operations between $2.50 billion to $2.58 billion (previous estimate was $2.41 billion to $2.53 billion), or $9.75 to $10.05 per share ($9.25–$9.75).

It, however, maintained the guidance for revenue growth rate at 3% to 4%, and the global medical customer growth range of 0.5 million to 0.6 million.

How Have Estimates Been Moving Since Then?

Following the release, investors have witnessed a downward trend in fresh estimates. There have been two revisions higher for the current quarter compared to six lower.

Cigna Corporation Price and Consensus

 

Cigna Corporation Price and Consensus | Cigna Corporation Quote

VGM Scores

At this time, the stock has an average Growth Score of C, a grade with the same score on the momentum front. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Our style scores indicate that the stock is more suitable for value investors than growth investors.

Outlook

Estimates have been broadly trending downward for the stock. The magnitude of this revision also indicates a downward shift. Interestingly, the stock has a Zacks Rank #3 (Hold). We are looking for an inline return from the stock in the next few months.

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