We are reiterating our Outperform recommendation on Aetna Inc.
(AET - Analyst Report
), reflecting our continued optimism about the company’s growth prospects and below-average health reform risks due to business mix.
Aetna’s business execution over the last few years has been excellent. While performance has been strong across the board, a stand-out area is its organic and acquisition-fueled growth.
Aetna has also made huge investment in technology upgradation.
Aetna recently concluded the acquisition of Coventry. The acquisition has enhanced the company’s Medicaid footprint, gives it more credibility, and better positioned the company for the enormous Medicaid RFP expansion and dual growth opportunities.
It has also made a number of acquisitions in its Commercial business over the past 2-3 years. At the same time, the company is witnessing an increase in membership.
Aetna is also aggressively forming Accountable Care Organizations to generate incremental revenues.
We view international growth opportunities at Aetna with growing optimism.
A strong balance sheet with an efficient capital management program provides inherent strength.
This Zacks Rank #2 (Buy) health insurer has been witnessing an increase in earnings estimate over the past 60 days. The Zacks Consensus Estimate for 2013 increased 0.7% to $5.87 as 9 out of 14 estimates moved north. The same for 2014 rose 0.2% to $6.36 as 6 of 15 estimates were raised over the same time frame. The expected long term earnings growth is 11.9%.
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