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Cigna (CI) Up 1.5% Since Last Earnings Report: Can It Continue?

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A month has gone by since the last earnings report for Cigna (CI - Free Report) . Shares have added about 1.5% in that time frame, underperforming the S&P 500.

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

Cigna Earnings Surpass Estimates in Q2, Improve Y/Y

Cigna’s second-quarter 2020 earnings of $5.81 per share surpassed the Zacks Consensus Estimate by 15% and also grew 35% year over year.

Results reflected revenue and earnings growth owing to a strong fundamental performance and lower medical costs from deferred care following the COVID-19 pandemic.

Cigna’s revenues of $39.3 billion beat the Zacks Consensus Estimate by 4.2% and also increased 13.9% year over year mirroring solid contributions from each of the company's ongoing businesses.

The company’s medical enrollment grew by 86,000 lives from the prior-year quarter to 17.083 million customers, attributable to membership gains in the Government and International markets.

Selling, general and administrative expense ratio was 8.4, improved 60 basis points year over year on significant growth in revenues and cost-control measures.

Strong Segmental Performances

Health Services: Adjusted revenues of $28.6 billion were up 21.5% year over year, driven by insourcing of Integrated Medical pharmacy volumes and a sturdy performance in specialty pharmacy services, partly offset by a decline in retail script volumes.

Operating income of $1.25 billion increased 7% year over year, representing customer growth, higher adjusted pharmacy scripts volumes, benefits from effective management of the supply chain and a steady performance in specialty pharmacy services, partially offset by an increase in operating expenses to support growth

Integrated Medical: Adjusted revenues of $9.23 billion were up 3% year over year, highlighting customer wins in Medicare Advantage and in the Select segment, as well as premium growth. However, this upside was partially offset by premium relief programs for clients that were carried out in response to the COVID-19 pandemic.

Operating income of $1.52 billion surged 53.83% year over year on significantly lower medical utilization in both the Commercial and Government segments compared with the historic patterns. However, this uptrend was partially offset by premium relief programs for clients and cost share waivers for customers.

International Markets: Adjusted revenues of $1.43 billion were up 3.1% year over year, reflecting consistent business growth, partially offset by an adverse foreign currency movement.

Operating earnings of $319 million soared 54.1% year over year, driven by lower claim levels amid the COVID-19 pandemic, constant business gains and operational efficiency.

Group Disability and Other Operations: Adjusted revenues of $1.33 billion inched up 1.5% year over year. Operating earnings of $132 million were down 11.4% year over year due to elevated claims in Cigna’s Life business, primarily related to the COVID-19 pandemic. However, this downside was partially mitigated by a favorable performance within the Disability business.

Capital Position

Cigna’s debt-to-capitalization ratio improved to 43.5 as of Jun 30, 2020 from 45.2 as of Dec 31, 2019.

Shareholders’ equity as of Jun 30, 2020 was $47.4 billion, up 8.1% year over year.

Share Buyback

Year to date through Jul 29, 2020, the company repurchased 8.3 million shares of common stock for $1.5 billion.

2020 Guidance

The company’s earlier-issued guidance for the full year was intact, indicating earnings per share to remain in the range of $18-$18.6 while adjusted revenues in the $154-$156 billion band.


 

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended downward during the past month. The consensus estimate has shifted -7.74% due to these changes.

VGM Scores

At this time, Cigna has a great Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

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

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Cigna has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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