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Cigna (CI) Q2 Earnings Beat on Strong U.S. Commercial Unit
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The Cigna Group (CI - Free Report) reported second-quarter 2023 adjusted earnings of $6.13 per share, which surpassed the Zacks Consensus Estimate by 2.5%. The bottom line dipped 1.1% year over year. Its shares gained 1.3% in the pre-market trading session, reflecting the outperformance.
Adjusted revenues advanced 7% year over year to $48,616 million in the quarter under review, attributable to strong performances of the Evernorth Health Services and Cigna Healthcare businesses. The top line beat the consensus mark by 3.2%.
However, the quarterly results were partially offset by lack of income from divested businesses and an elevated expense level.
As of Jun 30, 2023, CI’s medical customer base came in at 19.5 million, which rose 9.5% year over year and came higher than our estimate of 19 million. The growth came on the back of an expanding customer base within its U.S. Commercial and Medicare Advantage businesses.
Total benefits and expenses escalated 8% year over year to $46,365 million in the second quarter, higher than our estimate of $44,599.3 million. The adjusted selling, general and administrative (SG&A) expense ratio remained flat year over year at 7.1%.
Evernorth Health Services: The segment’s adjusted revenues rose 10% year over year to $38,205 million, higher than our estimate of $36,448.6 million. Solid organic growth in specialty and, care delivery and management solutions contributed to the unit’s quarterly performance.
Adjusted operating income on a pretax basis amounted to $1,516 million, which grew 3% year over year in the second quarter and beat our estimate of $1,494.2 million. The metric gained on specialty growth and consistent affordability improvements. Adjusted pre-tax margin deteriorated 20 basis points (bps) year over year to 4%.
Cigna Healthcare: The unit reported adjusted revenues of $12,714 million, which climbed 12% year over year in the quarter under review and outpaced our estimate of $11,818.2 million. Premium rate hikes and a growing customer base aided the segment’s quarterly performance.
However, pre-tax adjusted operating income came in at $1,172 million, which fell 5% year over year but came higher than our estimate of $1,070.1 million. The metric suffered a blow due to increased estimated risk adjustment payable in Cigna’s Individual business and reduced net investment income.
The segment’s medical care ratio (MCR) of 81.2% deteriorated 50 bps year over year at the second-quarter end and matched our estimate.
Financial Position (as of Jun 30, 2023)
Cigna exited the second quarter with cash and cash equivalents of $9,585 million, which soared 61.8% from the 2022-end figure. Total assets of $150 billion increased 4.3% from the figure at 2022 end.
Long-term debt amounted to $28,115 million, which inched up marginally from the figure as of Dec 31, 2022. Short-term debt amounted to $4,618 million.
Shareholders’ equity of $45,445 million grew 1.7% from the 2022-end level.
In the first half of 2023, CI generated cash flow from operations of $7,520 million, which more than doubled from the prior-year comparable period.
Debt-to-capitalization ratio of 41.9% improved 20 bps year over year at the second-quarter end.
2023 Guidance
Concurrent with second-quarter results, management revised its full-year guidance with respect to certain metrics.
Adjusted revenues are currently anticipated to be a minimum of $190 billion, higher from the prior outlook of at least $188 billion. The updated outlook suggests a minimum growth of 5.2% from the 2022 figure.
Adjusted operating income continues to be estimated to be a minimum of $7,360 million in 2023.
Adjusted earnings per share is reaffirmed to stay at a minimum of $24.70, which implies a minimum growth of 6.1% from the 2022 figure.
CI presently forecasts total medical customer growth to be a minimum of 1,400,000 this year, up from the prior outlook of growth of at least 1,300,000.
MCR continues to be anticipated within the 81.5-82.3% band for 2023. The adjusted SG&A expense ratio is estimated to be roughly 7.3%.
Adjusted operating income, on a pretax basis, for the Evernorth Health Services segment continues to be forecasted at a minimum of $6,400 million. Meanwhile, the same for the Cigna Healthcare unit is estimated to be a minimum of $4,425 million.
Operating cash flow is forecasted to be a minimum of $9,500 million, while the earlier view called for the metric to witness a minimum growth of $9,000 million. Earlier, capital expenditures were expected to be around $1,400 million.
Long-Term Targets Reaffirmed
Cigna expects to achieve average annual adjusted earnings per share growth within 10-13% in the long term.
Over the 2022-2026 period, management expects CI to generate operating cash flows of roughly $50 billion.
Of the Medical sector players that have reported second-quarter 2023 results so far, the bottom-line results of Elevance Health, Inc. (ELV - Free Report) , Intuitive Surgical, Inc. (ISRG - Free Report) and Abbott Laboratories (ABT - Free Report) beat the respective Zacks Consensus Estimate.
Elevance Health reported second-quarter 2023 adjusted net income of $9.04 per share, which outpaced the Zacks Consensus Estimate by 2.5%. The bottom line improved 13.4% year over year. ELV’s operating revenues, which amounted to $43,377 million, rose 12.7% year over year in the quarter under review. The top line surpassed the consensus mark by 4.5%. Medical membership of Elevance Health totaled around 48 million as of Jun 30, 2023, which increased 2% year over year in the second quarter. Overall premiums grew 10.6% year over year to $36,589 million in the quarter under review.
Intuitive Surgical reported second-quarter 2023 adjusted earnings per share of $1.42, which beat the Zacks Consensus Estimate of $1.32 by 7.6%. The bottom line improved 24.6% year over year. ISRG reported revenues of $1.76 billion, up 15.4% from the prior-year quarter’s number. On a constant currency basis, revenues were up 17% year over year. The top line beat the consensus estimate by 1.4%. Adjusted operating income totaled $617.6 million, up 16.3% year over year. Revenues at the Instruments & Accessories segment totaled $1.08 billion, indicating a year-over-year improvement of 20.2%.
Abbott Laboratories reported second-quarter 2023 adjusted earnings of $1.08 per share, which topped the Zacks Consensus Estimate by 3.8%. However, the adjusted figure declined from the prior-year quarter’s levels by 24.5%. Second-quarter worldwide sales of $9.98 billion were down 11.4% year over year on a reported basis. The top line exceeded the consensus estimate by 2.9%. ABT reported an adjusted operating profit of $2.04 billion in the quarter under review, down 29.2% year over year. Also, the adjusted operating margin contracted 517 bps to 20.4%. Established Pharmaceuticals segment’s product sales increased 5.2% on a reported basis (up 12.6% on an organic basis) to $1.29 billion.
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Cigna (CI) Q2 Earnings Beat on Strong U.S. Commercial Unit
The Cigna Group (CI - Free Report) reported second-quarter 2023 adjusted earnings of $6.13 per share, which surpassed the Zacks Consensus Estimate by 2.5%. The bottom line dipped 1.1% year over year. Its shares gained 1.3% in the pre-market trading session, reflecting the outperformance.
Adjusted revenues advanced 7% year over year to $48,616 million in the quarter under review, attributable to strong performances of the Evernorth Health Services and Cigna Healthcare businesses. The top line beat the consensus mark by 3.2%.
However, the quarterly results were partially offset by lack of income from divested businesses and an elevated expense level.
As of Jun 30, 2023, CI’s medical customer base came in at 19.5 million, which rose 9.5% year over year and came higher than our estimate of 19 million. The growth came on the back of an expanding customer base within its U.S. Commercial and Medicare Advantage businesses.
Total benefits and expenses escalated 8% year over year to $46,365 million in the second quarter, higher than our estimate of $44,599.3 million. The adjusted selling, general and administrative (SG&A) expense ratio remained flat year over year at 7.1%.
The Cigna Group Price, Consensus and EPS Surprise
The Cigna Group price-consensus-eps-surprise-chart | The Cigna Group Quote
Segmental Update
Evernorth Health Services: The segment’s adjusted revenues rose 10% year over year to $38,205 million, higher than our estimate of $36,448.6 million. Solid organic growth in specialty and, care delivery and management solutions contributed to the unit’s quarterly performance.
Adjusted operating income on a pretax basis amounted to $1,516 million, which grew 3% year over year in the second quarter and beat our estimate of $1,494.2 million. The metric gained on specialty growth and consistent affordability improvements. Adjusted pre-tax margin deteriorated 20 basis points (bps) year over year to 4%.
Cigna Healthcare: The unit reported adjusted revenues of $12,714 million, which climbed 12% year over year in the quarter under review and outpaced our estimate of $11,818.2 million. Premium rate hikes and a growing customer base aided the segment’s quarterly performance.
However, pre-tax adjusted operating income came in at $1,172 million, which fell 5% year over year but came higher than our estimate of $1,070.1 million. The metric suffered a blow due to increased estimated risk adjustment payable in Cigna’s Individual business and reduced net investment income.
The segment’s medical care ratio (MCR) of 81.2% deteriorated 50 bps year over year at the second-quarter end and matched our estimate.
Financial Position (as of Jun 30, 2023)
Cigna exited the second quarter with cash and cash equivalents of $9,585 million, which soared 61.8% from the 2022-end figure. Total assets of $150 billion increased 4.3% from the figure at 2022 end.
Long-term debt amounted to $28,115 million, which inched up marginally from the figure as of Dec 31, 2022. Short-term debt amounted to $4,618 million.
Shareholders’ equity of $45,445 million grew 1.7% from the 2022-end level.
In the first half of 2023, CI generated cash flow from operations of $7,520 million, which more than doubled from the prior-year comparable period.
Debt-to-capitalization ratio of 41.9% improved 20 bps year over year at the second-quarter end.
2023 Guidance
Concurrent with second-quarter results, management revised its full-year guidance with respect to certain metrics.
Adjusted revenues are currently anticipated to be a minimum of $190 billion, higher from the prior outlook of at least $188 billion. The updated outlook suggests a minimum growth of 5.2% from the 2022 figure.
Adjusted operating income continues to be estimated to be a minimum of $7,360 million in 2023.
Adjusted earnings per share is reaffirmed to stay at a minimum of $24.70, which implies a minimum growth of 6.1% from the 2022 figure.
CI presently forecasts total medical customer growth to be a minimum of 1,400,000 this year, up from the prior outlook of growth of at least 1,300,000.
MCR continues to be anticipated within the 81.5-82.3% band for 2023. The adjusted SG&A expense ratio is estimated to be roughly 7.3%.
Adjusted operating income, on a pretax basis, for the Evernorth Health Services segment continues to be forecasted at a minimum of $6,400 million. Meanwhile, the same for the Cigna Healthcare unit is estimated to be a minimum of $4,425 million.
Operating cash flow is forecasted to be a minimum of $9,500 million, while the earlier view called for the metric to witness a minimum growth of $9,000 million. Earlier, capital expenditures were expected to be around $1,400 million.
Long-Term Targets Reaffirmed
Cigna expects to achieve average annual adjusted earnings per share growth within 10-13% in the long term.
Over the 2022-2026 period, management expects CI to generate operating cash flows of roughly $50 billion.
Zacks Rank
Cigna currently carries a Zacks Rank #3 (Hold). 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 second-quarter 2023 results so far, the bottom-line results of Elevance Health, Inc. (ELV - Free Report) , Intuitive Surgical, Inc. (ISRG - Free Report) and Abbott Laboratories (ABT - Free Report) beat the respective Zacks Consensus Estimate.
Elevance Health reported second-quarter 2023 adjusted net income of $9.04 per share, which outpaced the Zacks Consensus Estimate by 2.5%. The bottom line improved 13.4% year over year. ELV’s operating revenues, which amounted to $43,377 million, rose 12.7% year over year in the quarter under review. The top line surpassed the consensus mark by 4.5%. Medical membership of Elevance Health totaled around 48 million as of Jun 30, 2023, which increased 2% year over year in the second quarter. Overall premiums grew 10.6% year over year to $36,589 million in the quarter under review.
Intuitive Surgical reported second-quarter 2023 adjusted earnings per share of $1.42, which beat the Zacks Consensus Estimate of $1.32 by 7.6%. The bottom line improved 24.6% year over year. ISRG reported revenues of $1.76 billion, up 15.4% from the prior-year quarter’s number. On a constant currency basis, revenues were up 17% year over year. The top line beat the consensus estimate by 1.4%. Adjusted operating income totaled $617.6 million, up 16.3% year over year. Revenues at the Instruments & Accessories segment totaled $1.08 billion, indicating a year-over-year improvement of 20.2%.
Abbott Laboratories reported second-quarter 2023 adjusted earnings of $1.08 per share, which topped the Zacks Consensus Estimate by 3.8%. However, the adjusted figure declined from the prior-year quarter’s levels by 24.5%. Second-quarter worldwide sales of $9.98 billion were down 11.4% year over year on a reported basis. The top line exceeded the consensus estimate by 2.9%. ABT reported an adjusted operating profit of $2.04 billion in the quarter under review, down 29.2% year over year. Also, the adjusted operating margin contracted 517 bps to 20.4%. Established Pharmaceuticals segment’s product sales increased 5.2% on a reported basis (up 12.6% on an organic basis) to $1.29 billion.