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Analyst Blog

On May 13, 2013, shares of Cigna Corp. (CI - Analyst Report) reached a 52-week high of $69.06 per share. The momentum was driven by the company’s strong first-quarter earnings.

On May 2, 2013, Cigna reported first-quarter 2013 net operating earnings of $1.72 per share, which outpaced the Zacks Consensus Estimate of $1.43 per share by 20.3%. Moreover, the results surged nearly 39% year over year. The better-than-expected results came on the back of improved top-line, favorable operating expenses and medical costs, including favorable prior-year reserve development in the Global Health Care business.

Consolidated revenues came in at $8.2 billion, up 21% year over year driven by higher premiums and fees.

With respect to earnings trend, Cigna witnessed positive earnings surprises in each of the last 4 quarters with an average beat of 13.85%. The company expects to deliver operating earnings of $1.735–$1.865 billion or $6.00–$6.45 per share in 2013.

Further, the valuation of Cigna looks fair. The shares are currently trading at a 8.8% discount to a peer group on a price-to-earnings but at a substantial premium to the peer group average on a price-to-book basis. However, its return on equity of 19.8% is substantially higher than the peer group average of 6.0%. The year to date return from the stock is 29.1%, much above S&P’sreturn of 14.6%.  

Cigna currently carries a Zacks Rank #2 (Buy). Other stocks in the multi-line insurance business that are worth a look are Eastern Insurance Holdings, Inc. , Kemper Corporation (KMPR - Snapshot Report) and Old Republic International Corporation (ORI - Snapshot Report). All these stocks carry a Zacks Rank #1 (Strong Buy).