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Here's Why You Should Add Cigna (CI) Stock to Your Portfolio
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The Cigna Group (CI - Free Report) is well-poised to grow on the back of strategic acquisitions and collaborations, and rising pharmacy revenues. Its diversified product portfolio, wide agent network and growing Evernorth business bode well.
Cigna, with a market cap of $100 billion, is a healthcare plan providing company in the United States with a wide range of products. CI provides pharmacy services, benefits management, care solutions, as well as data and analytics. These services are used by health plans, employers, healthcare providers and government organizations.
Courtesy of solid prospects, this Zacks Rank #2 (Buy) stock is worth adding at the moment.
Let’s delve deeper.
The Zacks Consensus Estimate for Cigna’s 2024 earnings per share (EPS) is pegged at $28.34, indicating a 13% year-over-year rise. The estimate remained stable over the past week. Adjusted EPS guidance for 2024 is anticipated to be a minimum of $28.25. Cigna expects to maintain average annual adjusted EPS growth in the range of 10-14% in the long term. The company beat earnings estimates in all the last four quarters, with the average surprise being 2.9%.
The consensus estimate for 2024 revenues is pegged at $235.1 billion, suggesting a 20.4% rise. Growing pharmacy revenues, premiums and fees are expected to boost the top line. We expect pharmacy revenues to rise 23.6% in 2024, along with a 9.2% jump in premiums. The company expects adjusted revenues at a minimum of $235 billion in 2024.
Cigna’s membership has been growing for the past few quarters, and the trend is expected to continue due to the expansion of its customer base within its U.S. Commercial business. We expect Individual and Family Plans, small and middle market medical customers to grow 0.1%, 0.8% and 0.6%, respectively, in 2024. Cigna expects long-term average annual adjusted income growth in the range of 7%-10% in its Cigna Healthcare segment. Long-term average margins are expected to be in the range of 10.5-11.5%.
Cigna’s Evernorth segment also remains well-poised for growth on the back of improved pharmacy benefits, care services and specialty performance. CI expects long-term average annual adjusted income growth between 5% and 8%. It also expects the pharmacy benefit services business to win 270 new clients in 2024. CI recently unveiled new offerings like EncricleRx and Evernorth Behavioral Care Group, improving the segment’s prospects.
The company’s acquisitions like Express Scripts and collaborations, including those with CarepathRx, Virgin Pulse, VillageMD and others, continue to expand its portfolio and capabilities. These enable the company to provide customers with a holistic range of healthcare solutions. Value enhancing initiatives, such as divesting loss-making operations, are expected to improve efficiency in the future. In January 2024, CI divested its Medicare Advantage Unit to Health Care Services for $3.3 billion. This move came after the business could not reach its long-term target margins due to high administrative expenses. Capital freed from this transaction is expected to be clawed back to invest in its core business of employer-sponsored coverage.
Cigna has a strong shareholder value-boosting program in place. In 2023, Cigna bought back 7.8 million shares for around $2.3 billion. It recently added $10 billion to its share buyback program, bringing the total repurchase fund to $11.3 billion. It paid $1.5 billion in dividends in 2023. It increased its quarterly dividend by 14% to $1.40 in the first quarter of 2024. It remains optimistic to pay an attractive dividend and generate an operating cash flow of a minimum of $11 billion for 2024. In the 2022-2026 period, management expects CI to generate operating cash flows of roughly $50 billion.
However, Cigna’s return on assets of 4.1% is below the industry average of 7.3%, suggesting that the company is generating less profit from its assets relative to its industry peers. Its divestments are targeted to reduce less profitable assets and improve returns. Given its ROA, the company has room to improve operational efficiency and optimize assets. Also, its high debt level, with a net debt to capital of 28.7% (against the industry average of 17.8%), can lead to growing interest expenses. Nevertheless, we believe that a systematic and strategic plan of action will drive CI’s long-term growth.
Organon’s earnings surpassed the Zacks Consensus Estimate in two of the last four quarters and missed the mark twice, the average surprise being 5.1%. The Zacks Consensus Estimate for OGN’s earnings indicates a rise of 3.6%, while the consensus mark for revenues suggests an improvement of 1% from the corresponding year-ago reported figures.
The consensus estimate for OGN’s 2024 earnings has moved 2.1% north in the past 30 days.
Ensign Group’s earnings outpaced the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 1.7%. The Zacks Consensus Estimate for ENSG’s 2024 earnings indicates a rise of 12.2% from the year-ago reported figure. The consensus mark for revenues indicates growth of 11.2% from the year-ago reported figure.
The consensus estimate for ENSG’s 2024 earnings has moved 0.6% north in the past 30 days.
Chemed’s earnings beat the Zacks Consensus Estimate in two of the trailing four quarters and missed the mark twice, the average surprise being 1.1%. The Zacks Consensus Estimate for CHE’s 2024 earnings indicates a rise of 15.1%, while the consensus mark for revenues suggests an improvement of 5.2% from the corresponding year-ago reported figures.
The Zacks Consensus Estimate for CHE’s 2024 earnings has moved 1.9% north in the past 30 days.
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Here's Why You Should Add Cigna (CI) Stock to Your Portfolio
The Cigna Group (CI - Free Report) is well-poised to grow on the back of strategic acquisitions and collaborations, and rising pharmacy revenues. Its diversified product portfolio, wide agent network and growing Evernorth business bode well.
Cigna, with a market cap of $100 billion, is a healthcare plan providing company in the United States with a wide range of products. CI provides pharmacy services, benefits management, care solutions, as well as data and analytics. These services are used by health plans, employers, healthcare providers and government organizations.
Courtesy of solid prospects, this Zacks Rank #2 (Buy) stock is worth adding at the moment.
Let’s delve deeper.
The Zacks Consensus Estimate for Cigna’s 2024 earnings per share (EPS) is pegged at $28.34, indicating a 13% year-over-year rise. The estimate remained stable over the past week. Adjusted EPS guidance for 2024 is anticipated to be a minimum of $28.25. Cigna expects to maintain average annual adjusted EPS growth in the range of 10-14% in the long term. The company beat earnings estimates in all the last four quarters, with the average surprise being 2.9%.
Cigna Group Price and EPS Surprise
Cigna Group price-eps-surprise | Cigna Group Quote
The consensus estimate for 2024 revenues is pegged at $235.1 billion, suggesting a 20.4% rise. Growing pharmacy revenues, premiums and fees are expected to boost the top line. We expect pharmacy revenues to rise 23.6% in 2024, along with a 9.2% jump in premiums. The company expects adjusted revenues at a minimum of $235 billion in 2024.
Cigna’s membership has been growing for the past few quarters, and the trend is expected to continue due to the expansion of its customer base within its U.S. Commercial business. We expect Individual and Family Plans, small and middle market medical customers to grow 0.1%, 0.8% and 0.6%, respectively, in 2024. Cigna expects long-term average annual adjusted income growth in the range of 7%-10% in its Cigna Healthcare segment. Long-term average margins are expected to be in the range of 10.5-11.5%.
Cigna’s Evernorth segment also remains well-poised for growth on the back of improved pharmacy benefits, care services and specialty performance. CI expects long-term average annual adjusted income growth between 5% and 8%. It also expects the pharmacy benefit services business to win 270 new clients in 2024. CI recently unveiled new offerings like EncricleRx and Evernorth Behavioral Care Group, improving the segment’s prospects.
The company’s acquisitions like Express Scripts and collaborations, including those with CarepathRx, Virgin Pulse, VillageMD and others, continue to expand its portfolio and capabilities. These enable the company to provide customers with a holistic range of healthcare solutions. Value enhancing initiatives, such as divesting loss-making operations, are expected to improve efficiency in the future. In January 2024, CI divested its Medicare Advantage Unit to Health Care Services for $3.3 billion. This move came after the business could not reach its long-term target margins due to high administrative expenses. Capital freed from this transaction is expected to be clawed back to invest in its core business of employer-sponsored coverage.
Cigna has a strong shareholder value-boosting program in place. In 2023, Cigna bought back 7.8 million shares for around $2.3 billion. It recently added $10 billion to its share buyback program, bringing the total repurchase fund to $11.3 billion. It paid $1.5 billion in dividends in 2023. It increased its quarterly dividend by 14% to $1.40 in the first quarter of 2024. It remains optimistic to pay an attractive dividend and generate an operating cash flow of a minimum of $11 billion for 2024. In the 2022-2026 period, management expects CI to generate operating cash flows of roughly $50 billion.
However, Cigna’s return on assets of 4.1% is below the industry average of 7.3%, suggesting that the company is generating less profit from its assets relative to its industry peers. Its divestments are targeted to reduce less profitable assets and improve returns. Given its ROA, the company has room to improve operational efficiency and optimize assets. Also, its high debt level, with a net debt to capital of 28.7% (against the industry average of 17.8%), can lead to growing interest expenses. Nevertheless, we believe that a systematic and strategic plan of action will drive CI’s long-term growth.
Other Key Medical Picks
Some other top-ranked stocks in the Medical space are Organon & Co. (OGN - Free Report) , The Ensign Group, Inc. (ENSG - Free Report) and Chemed Corporation (CHE - Free Report) . While Organon currently sports a Zacks Rank #1 (Strong Buy), Ensign Group and Chemed carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Organon’s earnings surpassed the Zacks Consensus Estimate in two of the last four quarters and missed the mark twice, the average surprise being 5.1%. The Zacks Consensus Estimate for OGN’s earnings indicates a rise of 3.6%, while the consensus mark for revenues suggests an improvement of 1% from the corresponding year-ago reported figures.
The consensus estimate for OGN’s 2024 earnings has moved 2.1% north in the past 30 days.
Ensign Group’s earnings outpaced the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 1.7%. The Zacks Consensus Estimate for ENSG’s 2024 earnings indicates a rise of 12.2% from the year-ago reported figure. The consensus mark for revenues indicates growth of 11.2% from the year-ago reported figure.
The consensus estimate for ENSG’s 2024 earnings has moved 0.6% north in the past 30 days.
Chemed’s earnings beat the Zacks Consensus Estimate in two of the trailing four quarters and missed the mark twice, the average surprise being 1.1%. The Zacks Consensus Estimate for CHE’s 2024 earnings indicates a rise of 15.1%, while the consensus mark for revenues suggests an improvement of 5.2% from the corresponding year-ago reported figures.
The Zacks Consensus Estimate for CHE’s 2024 earnings has moved 1.9% north in the past 30 days.