Aetna, Inc. (AET - Free Report) has completed a public offering of $1 billion of 3.875% senior notes due to mature on Aug 15, 2047. The company intends to use $987.6 million in net proceeds from this offering for general corporate purposes and to repay a portion of its 1.5% senior notes and floating-rate senior notes, both due in 2017.
Prior to the completion of this issuance, these notes received rating action from A.M. Best. The rating giant assigned a Long-Term Issue Credit Rating of “bbb” to these senior unsecured notes.
Aetna’s financial solvency reflected substantial improvement after the early redemption of $10.2 billion of senior notes in February 2017, which were issued in 2016 to finance the then pending buyout of Humana, Inc (HUM - Free Report) . However, following the termination of the buyout, Aetna redeemed a significant portion of that debt. As a result, the company’s financial leverage came down below 40% as of Jun 30, 2017 compared with 50% at the end of 2016.
Per A.M Best, the debt issuance is likely to cause a marginal increase to Aetna’s debt-to-capital ratio until the forthcoming maturities are paid back in 2017. Nevertheless, the rating giant also believes the ratio will eventually go below 40%.
Aetna witnessed a decline in its shareholders’ equity on Jun 30, 2017 from year-end 2016. The fall was due to its accelerated share repurchase and dividend hike. The company’s disciplined capital management is viewed favorably by investors. In last six months, the company’s shares have gained 25%, outpacing the industry’s rally of 21%.
However, Aetna’s financial results were adversely impacted by the payment of the $1 billion merger termination fee to Humana in early 2017. Despite this, we remain optimistic about Aetna’s financial excellence backed by its group commercial and government business that posted better-than-expected results in the second quarter of 2017, supported largely by premium growth and modest cost trend.
Zacks Rank & Other Stocks to Consider
Aetna presently holds a Zacks Rank #2 (Buy).You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Investors may also consider some other stocks in the same space like Anthem Inc. (ANTM - Free Report) and Amedisys Inc. (AMED - Free Report) . Both the stocks carry a Zacks Rank #2.
Anthem, one of the largest Health Maintenance Organization of the U.S, delivered positive earnings surprises in each of the last four quarters with an average beat of 8.58%.
Amedisys, an outpatient and Home Healthcare Organization of the U.S, delivered positive earnings surprises in three of the last four quarters with an average beat of 12.16%.
Will You Make a Fortune on the Shift to Electric Cars?
Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.
With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.
It's not the one you think.
See This Ticker Free >>