Yahoo Finance Cigna’s Diversification Strategy Boosts Its 4Q15 Earnings
Diversified Businesses Boost Cigna’s Profit Margins in 4Q15
Cigna’s 4Q15 takeaways
Cigna (CI) posted its 4Q15 and 2015 earnings on February 4, 2016. The company reported diluted operating earnings per share (or EPS) attributable to common shareholders of about $1.87 in 4Q15 and diluted operating EPS of approximately $8.66 in 2015.
Cigna’s diluted EPS beat analysts’ estimates
As the above chart shows, Cigna’s diluted EPS in 4Q15 managed to beat Wall Street analysts’ expectations by about $0.08. For the past four quarters, the company has managed to consistently outperform analysts’ projections. The company’s strong performance is mainly driven by effective implementation of its diversification strategy across domestic and global markets.
In 4Q15, Cigna earned about $9.6 billion in revenues, a rise of 7.5% on a year-over-year (or YoY) basis. Its net profit margin, however, remained constant at about 5.0% on a YoY basis. Cigna earned revenues of about $37.8 billion in 2015.
For 2015, peers such as UnitedHealth Group (UNH), Anthem (ANTM), and Aetna (AET) reported revenues of about $157 billion, $79.2 billion, and $60.3 billion, respectively. United Health Group, Cigna, Aetna, and Anthem form 4.3%, 1.4%, 1.4%, and 1.3%, respectively, of the Health Care Select Sector SPDR ETF (XLV).
Cigna’s subsequent stock price movement
After the release of its 4Q15 earnings results, Cigna’s share price rose by about 1.7%, from $132.5 on February 3, 2016, to $134.8 on February 4,. After its 3Q15 earnings results on November 6, 2015, the company’s stock price climbed from $132.8 to about $148.4 on December 29, then gradually fell to $131.9 by February 2, 2016.
On July 24, 2015, Anthem announced that it had entered into an agreement to acquire Cigna for a total consideration of about $54.2 billion, equivalent to $188 per share. However, Cigna has consistently traded at a substantial discount to the offer price, as investors are uncertain whether the deal will be approved by antitrust regulators.
The Cigna–Anthem and Aetna–Humana deals are also being scrutinized by 15 state attorneys general in addition to the U.S. Department of Justice Antitrust Division. The American Medical Association has also expressed its opposition to the Cigna–Anthem merger, as it believes that the deal will result in the erosion of competition in certain markets such as Connecticut.
To know more about the Cigna–Anthem deal, please refer to Anthem Gets Its Deal: A Merger with Cigna Is Now Pending.
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