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Cigna (CI) Q3 Earnings Top on Evernorth Unit, 2022 EPS View Up

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Cigna Corporation (CI - Free Report) reported third-quarter 2022 adjusted earnings of $6.04 per share, which beat the Zacks Consensus Estimate by 6%. The bottom line improved 5.4% year over year.

Adjusted revenues of $45,360 million rose 2.4% year over year on the back of higher pharmacy revenues. The top line beat the consensus mark by 1.1% and exceeded our estimate of $44,853.4 million.

Shares of Cigna gained 1.6% in the pre-market trading session, thanks to its better-than-expected third-quarter results.

The quarterly results were aided by solid performances of Evernorth and Cigna Healthcare businesses. However, elevated benefits and expenses were a spoilsport.

As of Sep 30, 2022, Cigna’s medical customer base grew 5.6% year over year to nearly 18 million on the back of expansion in U.S. Commercial fee-based client relationships. Both the consensus mark and our estimate for the metric stand at $18.1 million.

Total benefits and expenses of $43,139 million increased 3% year over year in the quarter under review. The adjusted selling, general and administrative (SG&A) expense ratio improved 10 basis points (bps) year over year to 6.9%.

Cigna Corporation Price, Consensus and EPS Surprise

Cigna Corporation Price, Consensus and EPS Surprise

Cigna Corporation price-consensus-eps-surprise-chart | Cigna Corporation Quote

Segmental Performances

Evernorth: The segment reported adjusted revenues of $35,698 million, which grew 6% year over year in the third quarter, thanks to solid organic growth in specialty pharmacy services. The figure surpassed the Zacks Consensus Estimate of $34,958 million and our estimate of $34,555.8 million.

Adjusted operating income on a pretax basis improved 5% year over year to $1,625 million on the back of steady affordability enhancements and business growth.

Cigna Healthcare: Adjusted revenues of the segment increased 2% year over year to $11,176 million in the third quarter. Better specialty contributions, premium rises aimed at compensating for underlying cost trends and a growing U.S. Commercial customer base contributed to the sound performance of the segment. Our estimate for the metric stands at $11,388.7 million.

On a pretax basis, adjusted operating income of $1,053 million inched up 0.7% year over year. This growth came from a decline in the medical care ratio (MCR).

The segment’s MCR improved 270 bps year over year to 80.8% at the third-quarter end, courtesy of decreasing direct COVID-19 costs.

Financial Position (as of Sep 30, 2022)

Cigna exited the third quarter with cash and cash equivalents of $7,079 million, which climbed 39.3% from the 2021-end level. Total assets of $144.2 billion declined 6.9% from the level at 2021 end.

Long-term debt amounted to $28,090 million, down 9.8% from the figure as of Dec 31, 2021. Short-term debt amounted to $3,488 million.

Shareholders’ equity of $45,041 million slid 4.4% from the 2021-end level.

During the first nine months ended Sep 30, 2022, net cash provided by operating activities more than doubled the prior-year comparable period’s figure to $6,557 million.

Debt-to-capitalization ratio improved 80 bps year over year to 41.2%.

Share Repurchase Update

Cigna bought back 22 million shares of common stock worth around $5.8 billion on a year-to-date basis.

2022 Guidance

Management updated the full-year outlook for some of its metrics.

Adjusted revenues are currently projected at a minimum of $179 billion, up from the previous view of at least $178 billion. The revised guidance indicates growth of at least 2.8% from the 2021 reported figure.

Adjusted earnings per share (EPS) are predicted to be a minimum of $23.10, higher than the prior guidance of $22.90. The adjusted guidance suggests minimum growth of 12.8% from the 2021 reported figure.

Adjusted operating income on a pretax basis is anticipated at around $4,050 million in Cigna Healthcare business. The previous guidance sugested the metric to be around $4,025 million.

CI anticipates total medical customer growth of at least 9,00,000, while the prior view estimated the metric to be at least 8,00,000.

MCR is predicted within 81.5-82.2% compared with the earlier outlook of 81.5-82.5%. Adjusted SG&A expense ratio is estimated at roughly 7.3%, while the earlier guidance called for the metric between 7.1% and 7.3%.

Prior Projections

Adjusted operating income on a pretax basis is continued to be expected at around $6,125 million in Evernorth business.

Operating cash flows are still projected to be a minimum of $8,500 million.

Long-Term Targets

Over the long term, Cigna expects to achieve revenue growth in the range of 6-8%, while average annual adjusted EPS growth is estimated within 10-13%.

Management expects CI to generate operating cash flows of around $50 billion in the 2022-2026 period.

Zacks Rank

Cigna currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Other Medical Sector Releases

Of the Medical sector players that have reported third-quarter results so far, the bottom-line results of Universal Health Services, Inc. (UHS - Free Report) , Centene Corporation (CNC - Free Report) and HCA Healthcare, Inc. (HCA - Free Report) beat the respective Zacks Consensus Estimate.

Universal Health reported third-quarter 2022 adjusted earnings of $2.54 per share, which beat the Zacks Consensus Estimate by 5.8%. However, the bottom line fell 4.9% year over year. Net revenues of $3.3 billion improved 5.7% year over year in the third quarter. The top line outpaced the consensus mark by a whisker. Adjusted admissions (adjusted for outpatient activity) rose 1.9% year over year on a same-facility basis at UHS’ acute care hospitals, while adjusted patient days declined 5% year over year.

Centene’s third-quarter 2022 adjusted EPS of $1.30 outpaced the Zacks Consensus Estimate by 6.6%. The bottom line grew 3.2% year over year. CNC’s revenues of $35.9 billion advanced 11% year over year in the quarter under review and also beat the consensus mark by 1.1%. Premiums of $31.8 billion rose 10.3% year over year in the quarter under review, while service revenues climbed 14.7% year over year to $1.9 billion.

HCA Healthcare reported third-quarter 2022 adjusted earnings of $3.93 per share, which beat the Zacks Consensus Estimate by 1%. However, the bottom line dropped 14% year over year. Revenues of HCA decreased 2% year over year to $15 billion in the third quarter and missed the consensus mark by a whisker. Same-facility equivalent admissions rose 2.3% year over year in the third quarter, while same-facility admissions fell 1.5% year over year.

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