Back to top

Analyst Blog

On Mar 25, Zacks Investment Research downgraded U.S. health insurer Cigna Corp. (CI - Analyst Report) to a Zacks Rank #4 (Sell).

Why the Downgrade?

This U.S. health insurer reported lackluster fourth quarter earnings. Net operating earnings of $1.39 per share missed the Zacks Consensus Estimate by 6.1% and were also down 11.5% year over year. Higher expenses caused the earnings miss.  

Cigna has been witnessing an increase in medical costs recently. Management expects medical cost to increase in the range of 5-6% for 2014 which is higher compared to less than 5% in 2013. The company’s medical cost is likely to increase due to higher medical utilization, which in turn will eat into margins.

Cigna is also expected to face pressure in its Medicare Advantage (MA) business. Reimbursement cut to MA will drag down the company’s margins.

The company’s exposure to commercial mortgage loans and real estate loans is also a concern.

Owing to concerns reflecting a tough time ahead, analysts covering the stock downgraded their earnings estimates. Over the last 60 days, the Zacks Consensus Estimate for 2014 moved down by 1.6% to $7.19 as 10 of the 14 estimates  were revised downward. The same for 2015 dived down 1.2% to $7.96 as 9 of 12 estimates were pulled down over the same time frame.

Other Stocks to Consider

Some better-ranked insurance stocks worth considering are MGIC Investment Corp. (MTG - Analyst Report) with a Zacks Rank #1 (Strong Buy), and FBL Financial Group Inc. (FFG - Snapshot Report) and Kemper Corp. (KMPR - Snapshot Report) both with a Zacks Rank # 2 (Buy).

Please login to Zacks.com or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research

Close

Are you a new Zacks Member or a visitor to Zacks.com?

Top Zacks Features

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
UNITED THER… UTHR 117.83 +28.51%
TRIQUINT SE… TQNT 20.67 +6.52%
RF MICRO DE… RFMD 12.47 +6.04%
VASCO DATA… VDSI 14.77 +4.68%
BANCO DO BR… BDORY 15.53 +3.95%