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Cigna (CI) Rises 18.9% in 6 Months: More Growth in Store?

Cigna Corporation’s CI shares have jumped 18.9% in the past six months compared with the 7.7% rise of the industry it belongs to, thanks to the growing demand for healthcare-related plans. The company has also been gaining from an active inorganic growth strategy.

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Based in Bloomfield, CT, Cigna provides health services products and solutions to a wide range of clients. CI has a market cap of $99 billion.

Can it Retain Momentum?

The answer is yes and before we get into the details, let us show you how its estimates for the full-year 2022 stand. The Zacks Consensus Estimate for Cigna’s 2022 earnings is pegged at $23.13 per share, indicating a 13% rise from $20.47 a year ago. It has witnessed 11 upward estimate revisions in the past 30 days against no movement in the opposite direction. The company beat earnings estimates in each of the last four quarters, with an average of 9.8%.

The consensus estimate for 2022 revenuesstands at $180.3 billion, signaling a 3.6% year-over-year rise.

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

A diversified product portfolio, vast agent network and superior services are supporting Cigna’s membership growth. Its strong Government business, including Medicare Advantage, is a major positive. CI anticipates total medical customer growth of at least 900,000 while the prior view estimated the metric to be at least 800,000. Our estimate suggests total medical customers for 2022 to grow 5.4% year over year.

Strategic acquisitions are helping the company to expand its scale and tap into new markets. Buyouts like Express Scripts, OnePath Life Insurance and others are praiseworthy. These moves are helping the company to consistently increase its top line. CI expects adjusted revenues for 2022 at a minimum of $179 billion. The company is on track to achieve 6-8% average annual adjusted revenue growth in the long term.

Cigna also expects long-term adjusted earnings per share to witness 10-13% average annual growth. The company does not shy away from divesting less profitable businesses to improve efficiency and the bottom line. CI divested its life, accident and supplemental benefits businesses to insurer Chubb and received net after-tax proceeds of around $5.1 billion. It also divested its non-health insurance unit, Group Life and Disability insurance business to New York Life, America’s largest mutual life insurer.

With the growing proportion of older persons in the population, demand for the company’s products is expected to increase. Also, rising employment and economic recovery will benefit the company’s commercial business. We expect total U.S. Commercial customers to rise 7.1% in 2022. This will result in higher premiums. Furthermore, we expect pharmacy revenues to jump 5.2% year over year in 2022.

Cigna has a strong shareholder value-boosting program in place. It bought back 22 million shares of common stock worth around $5.8 billion over the first three quarters. This year, it plans to buy back at least $7 billion worth of shares.

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. At the third-quarter end, it had long-term debt of $28,090 million and short-term debt of $3,488 million. Total benefits and expenses rose 5% year over year in the first nine months of 2022. Nevertheless, we believe that a systematic and strategic plan of action will drive the company’s long-term growth.

Key Picks

Some better-ranked stocks in the broader medical space are Elevance Health Inc. ELV, AMN Healthcare Services, Inc. AMN and Inventiva S.A. IVA, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for Elevance Health’s full-year earnings is currently pegged at $29.02 per share, indicating a year-over-year increase of 11.7%. ELV beat earnings estimates in all the past four quarters, with an average surprise of 4.1%.

The Zacks Consensus Estimate for AMN Healthcare’s current year bottom line indicates a 44% improvement from the prior-year reported number. The consensus estimate for AMN’s top line also indicates 30.1% year-over-year growth.

The Zacks Consensus Estimate for Inventiva’s 2022 bottom line indicates an 11.3% year-over-year improvement. IVA has witnessed one upward estimate revision in the past 60 days against none in the opposite direction.

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