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Will High Medical Costs Hurt Cigna (CI) in Q2 Earnings?
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The Cigna Group (CI - Free Report) is scheduled to release second-quarter 2023 results on Aug 3, before the opening bell.
Q2 Estimates
The Zacks Consensus Estimate for Cigna’s second-quarter earnings per share is pegged at $5.98, which indicates a decline of 3.9% from the prior-year quarter’s reported figure.
The consensus mark for revenues is $47.1 billion, suggesting 3.7% growth from the year-ago quarter’s reported number.
Earnings Surprise History
Cigna boasts a solid earnings surprise history. Its bottom line beat estimates in each of the trailing four quarters, the average surprise being 6.56%. This is depicted in the chart below:
In the second quarter, revenues of Cigna are likely to have benefited on the back of solid pharmacy revenues stemming from a well-performing specialty pharmacy business within the Evernorth Health Services segment. The unit is also expected to have gained on new client wins and strong customer retention rates coupled with strong contributions by the Express Scripts business.
We expect pharmacy revenues of CI to be $33.6 billion in the to-be-reported quarter, which indicates an improvement of 5% year over year. Our estimate for adjusted revenues of the Evernorth segment stands at $36.4 billion, suggesting 4.5% growth from the prior-year quarter’s reported figure.
A growing customer base within the U.S. Commercial, U.S. Government and International Health businesses is expected to have provide an impetus to the performance of the Cigna Healthcare segment in the second quarter. A diversified and cost-effective health plan suite, as well as the roll out of such plans across different geographic regions, are likely to have fetched customer wins to Cigna in the to-be-reported quarter.
We estimate total medical customers of Cigna to be nearly 19 million as of Jun 30, 2023, up 6.6% year over year. Our estimate for adjusted revenues of the Cigna Healthcare segment stands at $11.8 billion, which implies 4.2% growth year over year.
However, a decline in net investment income is likely to have been roadblocks to Cigna’s revenue growth in the second quarter. We expect net investment income to decline 24.2% year over year.
Its margins are expected to have suffered a blow due to an elevated medical cost level. This, in turn, is likely to have led to a higher medical care ratio (MCR) of Cigna in the to-be-reported quarter. We expect medical costs and other benefit expenses to increase 2.7% year over year. Our estimate for MCR stands at 81.2% in the second quarter, which indicates a deterioration of 50 basis points year over year.
What Our Quantitative Model Predicts
Our proven model does not conclusively predict an earnings beat for Cigna this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. However, that’s not the case here, as you see below.
Earnings ESP: Cigna has an Earnings ESP of -1.85% because the Most Accurate Estimate of $5.87 is pegged lower than the Zacks Consensus Estimate of $5.98. You can uncover the best stocks before they’re reported with our Earnings ESP Filter.
Zacks Rank: CI currently carries a Zacks Rank of 3.
Stocks to Consider
While an earnings beat looks uncertain for Cigna, here are some companies from the Medical space, which according to our model, have the right combination of elements to beat on earnings this time around:
The Zacks Consensus Estimate for JAZZ’s second-quarter 2023 earnings is pegged at $4.46 per share, indicating a rise of 3.7% from the prior-year quarter’s reported figure.
The consensus mark for Jazz Pharmaceuticals’ second-quarter revenues stands at $952.4 million, suggesting 2.1% growth from the year-ago quarter’s reported number.
Lantheus Holdings, Inc. (LNTH - Free Report) has an Earnings ESP of +3.40% and a Zacks Rank of 3, currently. The Zacks Consensus Estimate for LNTH’s second-quarter 2023 earnings is pegged at $1.33 per share, indicating an 49.4% increase from the prior-year quarter’s reported figure.
Lantheus’ earnings beat estimates in each of the trailing four quarters, the average surprise being 25.77%.
Henry Schein, Inc. (HSIC - Free Report) has an Earnings ESP of +0.62% and a Zacks Rank of 3, currently. The Zacks Consensus Estimate for HSIC’s second-quarter 2023 earnings is pegged at $1.25 per share, suggesting 7.8% growth from the year-ago quarter’s reported figure.
Henry Schein’s bottom line beat estimates in two of the trailing four quarters, matched the mark once and missed the same in the remaining one occassion, the average surprise being 0.51%.
Image: Bigstock
Will High Medical Costs Hurt Cigna (CI) in Q2 Earnings?
The Cigna Group (CI - Free Report) is scheduled to release second-quarter 2023 results on Aug 3, before the opening bell.
Q2 Estimates
The Zacks Consensus Estimate for Cigna’s second-quarter earnings per share is pegged at $5.98, which indicates a decline of 3.9% from the prior-year quarter’s reported figure.
The consensus mark for revenues is $47.1 billion, suggesting 3.7% growth from the year-ago quarter’s reported number.
Earnings Surprise History
Cigna boasts a solid earnings surprise history. Its bottom line beat estimates in each of the trailing four quarters, the average surprise being 6.56%. This is depicted in the chart below:
The Cigna Group Price and EPS Surprise
The Cigna Group price-eps-surprise | The Cigna Group Quote
Factors to Note
In the second quarter, revenues of Cigna are likely to have benefited on the back of solid pharmacy revenues stemming from a well-performing specialty pharmacy business within the Evernorth Health Services segment. The unit is also expected to have gained on new client wins and strong customer retention rates coupled with strong contributions by the Express Scripts business.
We expect pharmacy revenues of CI to be $33.6 billion in the to-be-reported quarter, which indicates an improvement of 5% year over year. Our estimate for adjusted revenues of the Evernorth segment stands at $36.4 billion, suggesting 4.5% growth from the prior-year quarter’s reported figure.
A growing customer base within the U.S. Commercial, U.S. Government and International Health businesses is expected to have provide an impetus to the performance of the Cigna Healthcare segment in the second quarter. A diversified and cost-effective health plan suite, as well as the roll out of such plans across different geographic regions, are likely to have fetched customer wins to Cigna in the to-be-reported quarter.
We estimate total medical customers of Cigna to be nearly 19 million as of Jun 30, 2023, up 6.6% year over year. Our estimate for adjusted revenues of the Cigna Healthcare segment stands at $11.8 billion, which implies 4.2% growth year over year.
However, a decline in net investment income is likely to have been roadblocks to Cigna’s revenue growth in the second quarter. We expect net investment income to decline 24.2% year over year.
Its margins are expected to have suffered a blow due to an elevated medical cost level. This, in turn, is likely to have led to a higher medical care ratio (MCR) of Cigna in the to-be-reported quarter. We expect medical costs and other benefit expenses to increase 2.7% year over year. Our estimate for MCR stands at 81.2% in the second quarter, which indicates a deterioration of 50 basis points year over year.
What Our Quantitative Model Predicts
Our proven model does not conclusively predict an earnings beat for Cigna this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. However, that’s not the case here, as you see below.
Earnings ESP: Cigna has an Earnings ESP of -1.85% because the Most Accurate Estimate of $5.87 is pegged lower than the Zacks Consensus Estimate of $5.98. You can uncover the best stocks before they’re reported with our Earnings ESP Filter.
Zacks Rank: CI currently carries a Zacks Rank of 3.
Stocks to Consider
While an earnings beat looks uncertain for Cigna, here are some companies from the Medical space, which according to our model, have the right combination of elements to beat on earnings this time around:
Jazz Pharmaceuticals plc (JAZZ - Free Report) has an Earnings ESP of +4.04% and a Zacks Rank of 2, currently. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for JAZZ’s second-quarter 2023 earnings is pegged at $4.46 per share, indicating a rise of 3.7% from the prior-year quarter’s reported figure.
The consensus mark for Jazz Pharmaceuticals’ second-quarter revenues stands at $952.4 million, suggesting 2.1% growth from the year-ago quarter’s reported number.
Lantheus Holdings, Inc. (LNTH - Free Report) has an Earnings ESP of +3.40% and a Zacks Rank of 3, currently. The Zacks Consensus Estimate for LNTH’s second-quarter 2023 earnings is pegged at $1.33 per share, indicating an 49.4% increase from the prior-year quarter’s reported figure.
Lantheus’ earnings beat estimates in each of the trailing four quarters, the average surprise being 25.77%.
Henry Schein, Inc. (HSIC - Free Report) has an Earnings ESP of +0.62% and a Zacks Rank of 3, currently. The Zacks Consensus Estimate for HSIC’s second-quarter 2023 earnings is pegged at $1.25 per share, suggesting 7.8% growth from the year-ago quarter’s reported figure.
Henry Schein’s bottom line beat estimates in two of the trailing four quarters, matched the mark once and missed the same in the remaining one occassion, the average surprise being 0.51%.
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