A month has gone by since the last earnings report for Aetna Inc. . Shares have added about 4.3% in that time frame, outperforming the market.
Will the recent positive trend continue leading up to the stock's next earnings release, or is it 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 drivers.
Aetna Earnings Beat, Revenues Miss Estimates in Q1
Health insurer Aetna’s first-quarter 2017 earnings of $2.71 per share surpassed the Zacks Consensus Estimate of $2.36 and also grew 17% year over year. In spite of higher costs associated with the termination of merger agreement with Humana Inc. (HUM), Aetna displayed bottom-line improvement due to increasing investment in growth initiatives.
Operational Update
Total revenue of $15.2 billion missed the Zacks Consensus Estimate of $15.47 billion by approximately 2%. Revenues also declined 3.2% year over year due to lower premiums in Aetna's Health Care segment.
Total company expense ratiodeteriorated 720 bps (bps) from the prior-year quarter was 25.4% in the first quarter, primarily due to costs associated with the termination of the merger agreement with Humana during the quarter.
Adjusted expense ratio improved 200 bps over the year-ago quarter to 16.0% in the first quarter, primarily due to the temporary suspension of the HIF in 2017 and the execution of Aetna's expense-management initiatives.
First-quarter pre-tax operating margin was 10%, up 50 bps year over year. The upside was primarily driven by strong performance in Aetna's Health Care segment despite continued pressure in Aetna's individual Commercial products
Medical membership totaled 22.4 million as of Mar 31, 2017, down 2.4% year over year.
Segmental Performance Update
Health Care segment
Aetna’s Health Care segment recorded both total revenue and adjusted revenues of $14.8 billion, down 1.3% year over year. The downside primarily stemmed from lower membership in Aetna's ACA compliant individual and small group products and temporary suspension of the HIF in 2017. This was somewhat offset by higher premium yields in Aetna's Commercial business and membership growth in Aetna's Government business.
Pre-tax adjusted earningswere relatively flat with the prior-year quarter at approximately $1.5 billion. Aetna's first-quarter results reflect strong performance across all of its Health Care businesses, with the exception of individual commercial products.
Group Insurance
Total revenue of $621 million for the first quarter inched up 1.5% year over year. Adjusted revenues were $619 million, up 1.6% year over year. Total revenue and adjusted revenues increased primarily due to higher premiums in Aetna's life and disability products and increased net investment income.
Pre-tax adjusted earnings were $33 million for the first quarter, up 32% year over year, primarily due to higher net investment income.
Large Case Pensions
Total revenue of $86 million in the first-quarter grew 28% year over year. Adjusted revenue of $86 million also increased 32% over the year-ago quarter. Total revenue and adjusted revenue increased primarily due to higher net investment income.
Pre-tax adjusted earningswere $4 million in the first quarter as against $1 million in the year-ago quarter.
Financial Position
Total assets were $56.3 billion as of Mar 31, 2016, down 19% over the prior-year quarter.
Total debt-to-consolidated capitalization ratio was 39.8% as of Mar 31, 2017, down 1380 bps from 53.6% at year-end 2016. This reflects the redemption of $10.2 billion aggregate principal amount of the senior notes issued in 2016, $750 million aggregate principal amount of senior notes due in 2020 and the repayment at maturity of $383 million aggregate principal amount of senior notes, each during the first quarter.
Guidance
The company expects 2017 operating earnings to be in the range of $8.80 to $9.00.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed a downward trend in fresh estimates. There has been one revision higher for the current quarter compared to six lower.
Aetna Inc. Price and Consensus
VGM Scores
At this time, the stock has a strong Growth Score of 'A', though it is lagging a lot on the momentum front with a 'C'. However, the stock was allocated a grade of 'A' on the value side, putting it in the top 20% 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.
Based on our scores, the stock is more suitable for value and growth investors than momentum investors .
Outlook
Estimates have been broadly trending downward for the stock. The magnitude of this revision also indicates a downward shift. Notably, the stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.
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Aetna (AET) Up 4.3% Since Earnings Report: Can It Continue?
A month has gone by since the last earnings report for Aetna Inc. . Shares have added about 4.3% in that time frame, outperforming the market.
Will the recent positive trend continue leading up to the stock's next earnings release, or is it 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 drivers.
Aetna Earnings Beat, Revenues Miss Estimates in Q1
Health insurer Aetna’s first-quarter 2017 earnings of $2.71 per share surpassed the Zacks Consensus Estimate of $2.36 and also grew 17% year over year. In spite of higher costs associated with the termination of merger agreement with Humana Inc. (HUM), Aetna displayed bottom-line improvement due to increasing investment in growth initiatives.
Operational Update
Total revenue of $15.2 billion missed the Zacks Consensus Estimate of $15.47 billion by approximately 2%. Revenues also declined 3.2% year over year due to lower premiums in Aetna's Health Care segment.
Total company expense ratiodeteriorated 720 bps (bps) from the prior-year quarter was 25.4% in the first quarter, primarily due to costs associated with the termination of the merger agreement with Humana during the quarter.
Adjusted expense ratio improved 200 bps over the year-ago quarter to 16.0% in the first quarter, primarily due to the temporary suspension of the HIF in 2017 and the execution of Aetna's expense-management initiatives.
First-quarter pre-tax operating margin was 10%, up 50 bps year over year. The upside was primarily driven by strong performance in Aetna's Health Care segment despite continued pressure in Aetna's individual Commercial products
Medical membership totaled 22.4 million as of Mar 31, 2017, down 2.4% year over year.
Segmental Performance Update
Health Care segment
Aetna’s Health Care segment recorded both total revenue and adjusted revenues of $14.8 billion, down 1.3% year over year. The downside primarily stemmed from lower membership in Aetna's ACA compliant individual and small group products and temporary suspension of the HIF in 2017. This was somewhat offset by higher premium yields in Aetna's Commercial business and membership growth in Aetna's Government business.
Pre-tax adjusted earningswere relatively flat with the prior-year quarter at approximately $1.5 billion. Aetna's first-quarter results reflect strong performance across all of its Health Care businesses, with the exception of individual commercial products.
Group Insurance
Total revenue of $621 million for the first quarter inched up 1.5% year over year. Adjusted revenues were $619 million, up 1.6% year over year. Total revenue and adjusted revenues increased primarily due to higher premiums in Aetna's life and disability products and increased net investment income.
Pre-tax adjusted earnings were $33 million for the first quarter, up 32% year over year, primarily due to higher net investment income.
Large Case Pensions
Total revenue of $86 million in the first-quarter grew 28% year over year. Adjusted revenue of $86 million also increased 32% over the year-ago quarter. Total revenue and adjusted revenue increased primarily due to higher net investment income.
Pre-tax adjusted earningswere $4 million in the first quarter as against $1 million in the year-ago quarter.
Financial Position
Total assets were $56.3 billion as of Mar 31, 2016, down 19% over the prior-year quarter.
Total debt-to-consolidated capitalization ratio was 39.8% as of Mar 31, 2017, down 1380 bps from 53.6% at year-end 2016. This reflects the redemption of $10.2 billion aggregate principal amount of the senior notes issued in 2016, $750 million aggregate principal amount of senior notes due in 2020 and the repayment at maturity of $383 million aggregate principal amount of senior notes, each during the first quarter.
Guidance
The company expects 2017 operating earnings to be in the range of $8.80 to $9.00.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed a downward trend in fresh estimates. There has been one revision higher for the current quarter compared to six lower.
Aetna Inc. Price and Consensus
Aetna Inc. Price and Consensus | Aetna Inc. Quote
VGM Scores
At this time, the stock has a strong Growth Score of 'A', though it is lagging a lot on the momentum front with a 'C'. However, the stock was allocated a grade of 'A' on the value side, putting it in the top 20% 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.
Based on our scores, the stock is more suitable for value and growth investors than momentum investors .
Outlook
Estimates have been broadly trending downward for the stock. The magnitude of this revision also indicates a downward shift. Notably, the stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.