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Why You Should Retain Cigna (CI) Stock in 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 membership growth. Its diversified product portfolio, wide agent network and growing Evernorth business bode well.
Cigna — with a market cap of $87.5 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 #3 (Hold) stock is worth holding on to at the moment.
Let’s delve deeper.
The Zacks Consensus Estimate for Cigna’s 2023 earnings per share (EPS) is pegged at $24.82, indicating a 6.7% year-over-year rise. It has witnessed seven upward estimate revisions in the past 60 days against two in the opposite direction. Cigna expects to maintain average annual adjusted EPS growth in the range of 10-13% in the long term. The company beat earnings estimates in all the last four quarters, with the average surprise being 2.5%.
The consensus estimate for 2023 revenues is pegged at $192.9 billion, suggesting a 6.8% rise. Growing pharmacy revenues, premiums and fees are expected to boost the top line. We expect pharmacy revenues to rise 5% this year, along with a 9.5% jump in premiums. The company remains on track to achieve 6-8% average annual adjusted revenue growth in the long term.
Cigna’s membership has been growing for many quarters now and the trend is expected to continue on expanding its customer base within its U.S. Commercial business. Cigna expects total medical customer growth to be a minimum of 1.4 million this year, up from the prior outlook of growth of at least 1.3 million.
Its 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 enhance efficiency in the future. In December 2023, CI’s Medicare Advantage Unit received acquisition interests from Elevance Health and Health Care Service. Following the final bids, this sale is expected to generate more than $3 billion.
Cigna has a strong shareholder value-boosting program in place. During the Jan 1-Nov 1, 2023 period, Cigna bought back 7.7 million shares for around $2.2 billion. It recently added $10 billion to its share buyback program, bringing the total repurchase fund to $11.3 billion. It paid $1.1 billion in dividends in the first three quarters. It remains optimistic to pay an attractive dividend and generate an operating cash flow of a minimum of $10.5 billion this year. During the 2022-2026 period, management expects CI to generate operating cash flows of roughly $50 billion.
Key Concerns
There are a few factors that investors should keep an eye on.
Cigna’s return on assets of 3.9% 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 28.1% (against the industry average of 10.8%), can lead to growing interest expenses. Nevertheless, we believe that a systematic and strategic plan of action will drive CI’s long-term growth.
The Zacks Consensus Estimate for Enovis’ current-year earnings implies a 4.9% increase from the year-ago reported figure. The consensus mark for its current-year revenues is pegged at $1.7 billion. ENOV beat earnings estimates in all the last four quarters, with an average surprise of 11%.
The Zacks Consensus Estimate for Centene’s 2023 earnings indicates a 15.1% year-over-year increase to $6.65 per share. It has witnessed one upward estimate revision over the past seven days against no movement in the opposite direction. The consensus mark for CNC’s 2023 revenues indicates 4.4% growth from a year ago.
The Zacks Consensus Estimate for Motus GI’s 2023 bottom line suggests a 67.2% year-over-year improvement. It beat earnings estimates in all the last four quarters, with an average surprise of 40.2%. MOTS has witnessed one upward estimate revision over the past 60 days against no movement in the opposite direction.
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Why You Should Retain Cigna (CI) Stock in Your Portfolio
The Cigna Group (CI - Free Report) is well poised to grow on the back of strategic acquisitions and collaborations, and membership growth. Its diversified product portfolio, wide agent network and growing Evernorth business bode well.
Cigna — with a market cap of $87.5 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 #3 (Hold) stock is worth holding on to at the moment.
Let’s delve deeper.
The Zacks Consensus Estimate for Cigna’s 2023 earnings per share (EPS) is pegged at $24.82, indicating a 6.7% year-over-year rise. It has witnessed seven upward estimate revisions in the past 60 days against two in the opposite direction. Cigna expects to maintain average annual adjusted EPS growth in the range of 10-13% in the long term. The company beat earnings estimates in all the last four quarters, with the average surprise being 2.5%.
Cigna Group Price and EPS Surprise
Cigna Group price-eps-surprise | Cigna Group Quote
The consensus estimate for 2023 revenues is pegged at $192.9 billion, suggesting a 6.8% rise. Growing pharmacy revenues, premiums and fees are expected to boost the top line. We expect pharmacy revenues to rise 5% this year, along with a 9.5% jump in premiums. The company remains on track to achieve 6-8% average annual adjusted revenue growth in the long term.
Cigna’s membership has been growing for many quarters now and the trend is expected to continue on expanding its customer base within its U.S. Commercial business. Cigna expects total medical customer growth to be a minimum of 1.4 million this year, up from the prior outlook of growth of at least 1.3 million.
Its 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 enhance efficiency in the future. In December 2023, CI’s Medicare Advantage Unit received acquisition interests from Elevance Health and Health Care Service. Following the final bids, this sale is expected to generate more than $3 billion.
Cigna has a strong shareholder value-boosting program in place. During the Jan 1-Nov 1, 2023 period, Cigna bought back 7.7 million shares for around $2.2 billion. It recently added $10 billion to its share buyback program, bringing the total repurchase fund to $11.3 billion. It paid $1.1 billion in dividends in the first three quarters. It remains optimistic to pay an attractive dividend and generate an operating cash flow of a minimum of $10.5 billion this year. During the 2022-2026 period, management expects CI to generate operating cash flows of roughly $50 billion.
Key Concerns
There are a few factors that investors should keep an eye on.
Cigna’s return on assets of 3.9% 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 28.1% (against the industry average of 10.8%), can lead to growing interest expenses. Nevertheless, we believe that a systematic and strategic plan of action will drive CI’s long-term growth.
Key Medical Picks
Some better-ranked stocks in the broader Medical space are Enovis Corporation (ENOV - Free Report) , Centene Corporation (CNC - Free Report) and Motus GI Holdings, Inc. (MOTS - Free Report) . Each stock presently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Enovis’ current-year earnings implies a 4.9% increase from the year-ago reported figure. The consensus mark for its current-year revenues is pegged at $1.7 billion. ENOV beat earnings estimates in all the last four quarters, with an average surprise of 11%.
The Zacks Consensus Estimate for Centene’s 2023 earnings indicates a 15.1% year-over-year increase to $6.65 per share. It has witnessed one upward estimate revision over the past seven days against no movement in the opposite direction. The consensus mark for CNC’s 2023 revenues indicates 4.4% growth from a year ago.
The Zacks Consensus Estimate for Motus GI’s 2023 bottom line suggests a 67.2% year-over-year improvement. It beat earnings estimates in all the last four quarters, with an average surprise of 40.2%. MOTS has witnessed one upward estimate revision over the past 60 days against no movement in the opposite direction.