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Is a Beat in Store for Cigna Corp (CI) This Earnings Season?

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With revenues and earnings projected to grow year over year, we expect Cigna Corp. (CI - Free Report) to beat expectations when it reports second-quarter results on Aug 4, before market open.

Why a Likely Positive Surprise?

Our proven model shows that Cigna has the right combination of the two key ingredients to beat earnings estimates.

Zacks ESP:  Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is +1.61%. This is because the Most Accurate estimate of $2.52 is pegged higher than the Zacks Consensus Estimate of $2.48. The positive ESP is a meaningful indicator of a likely positive earnings surprise. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Cigna carries a Zacks Rank #2 (Buy). Note that stocks with a Zacks Rank of #1, 2 or 3 have a significantly higher chance of beating on earnings.

Sell-rated stocks (Zacks Rank #4 or 5) should never be considered going into an earnings announcement.

Below is the company’s earnings surprise history as depicted in the chart:

Cigna Corporation Price and EPS Surprise

Cigna Corporation Price and EPS Surprise | Cigna Corporation Quote

What is Driving the Better-Than-Expected Earnings?

Cigna’s upcoming results are expected to demonstrate its continued strong operating performance from the Global Supplemental Benefits business. We expect the segment’s revenues to grow on the back of its leading innovations, direct-to-consumer distribution capabilities, and easy to understand, affordable products that are designed to fill in gaps in coverage and locally licensed and strongly managed talent.

Cigna has been able to keep its medical loss ratios at low levels for the past many quarters and the same will likely to continue given the company’s practice of aligning incentives for clients, customers and provider partners. Also, strong management of fee-for-service expenses will keep medical cost at bay.

In the company’s Group Disability and Life segment, premiums and fees are expected to grow on the back of modifications in the claims process made last year.

Membership has been increasing at Cigna for several years. We expect the trend to continue in the second quarter driven by strong client retention and customer growth in each of its employer segments – national accounts, middle-market, select and international.
 
Share repurchases made by the company during the quarter will provide an extra cushion to the bottom line.

Stocks That Warrant a Look

Here are some companies that you may consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:  

Kellogg Company (K - Free Report) will report second-quarter 2017 earnings results on Aug 3. It has an Earnings ESP of +2.17% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Tenet Healthcare Corp. (THC - Free Report) has an Earnings ESP of +5.88% and a Zacks Rank #3 (Hold). The company is expected to report second-quarter earnings results on Aug 7.

Financial Engines, Inc. (FNGN - Free Report) has an Earnings ESP of +4.00% and a Zacks Rank #2. The company is expected to report second-quarter earnings results on Aug 8.

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