Cigna Corporation CI is well-placed for growth on the back of its strategic acquisitions, strong international business and a rising top line.
Estimates for the stock have been revised upward over the past 30 days, reflecting analysts' optimism on the stock. The stock has seen the Zacks Consensus Estimate for 2019 earnings move 0.2% north over the same time frame.
The company even boasts a favorable earnings surprise history, having exceeded the Zacks Consensus Estimate in three of the trailing four quarters, the average beat being 7.4%. This also highlights the company’s operating excellence.
The stock carries an impressive VGM Score of B. Here V stands for Value, G for Growth and M for Momentum with the score being a weighted combination of all three factors.
Its return on equity — a profitability measure — stands at 14.2%, better than its industry's average of 7.9%.
The company looks well-poised for 2019 with the buyout of Express Scripts, the pharmacy benefits manager. The merged company is now a one-stop shop for customers' healthcare needs, ranging from the sale of drugs to insurance cover. Consumers will also gain traction from this consolidation as this is expected to improve treatments and lower medical costs.
The combined entity will be able to rise in ranks in the health insurance industry, thereby strengthening its competitive edge. This transaction would lead to total cost synergies of $650 million and a double-digit accretion to earnings in 2019.
The company has also been putting in efforts to expand its international operations, which have been contributing to its top- and bottom-line growth for the past many years. The company has its global businesses in places like India, Turkey, Hong Kong, etc. with the largest operation being in South Korea where it has been active for more than three decades.
Cigna’s revenue stream has been pretty impressive as is evident from its 2010-2018 CAGR of 11%. This growth can be attributable to the company’s specific acquisitions, its operating performance and provision of quality products and services.
Following solid results, the company provided a strong guidance, which should instill investors’ confidence in the stock. For 2019, Cigna expects earnings per share in the range of $16.25-$16.65, up from the prior range of $16-$16.50. Total revenues are projected in the $132.5-$134.5 billion band (earlier estimate was $131.5-$133.5 billion).
The company’s long-term growth rate is pegged at 12.2%, higher than the industry's average of 11.5%, which remains a positive for the company.
The Zacks Consensus Estimate for current-year earnings per share is pegged at $16.57, suggesting a rise of 16.5% on 178.1% higher revenues of $133.83 billion from the year-ago reported figures.
For 2020, the Zacks Consensus Estimate for earnings per share stands at $18.58 on $141.56 billion revenues, implying a respective 12.2% and 5.8% from the prior-year reported numbers.
Shares of this Zacks Rank #2 (Buy) company have lost 9% in a year’s time against its industry’s growth of 2%.
Other Key Picks
Investors interested in the medical sector can also take a look at some other top-ranked stocks like WellCare Health Plans, Inc. WCG, HCA Healthcare, Inc. HCA and Molina Healthcare, Inc MOH. You can see the complete list of today’s Zacks #1 Rank stocks here.
WellCare Health offers managed care services to government-sponsored health care programs. The company pulled off average positive surprise of 13.52% in the preceding four quarters. It holds a Zacks Rank of 2.
HCA Healthcare provides health care services. In the last four quarters, the company delivered average beat of 15.74%. It is a Zacks #2 Ranked player.
Molina Healthcare is a multi-state healthcare organization. In the trailing four quarters, the company came up with average beat of 88.17%. It sports a Zacks Rank #1 (Strong Buy).
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