Back to top

Will Revenue, Membership Growth Aid Cigna (CI) Q2 Earnings?

Read MoreHide Full Article

Cigna Corp.’s (CI - Free Report) second-quarter results scheduled on Aug 2, 2018, should show strong performance across each of its priority growth platforms — Commercial employer, U.S. seniors, Global Supplemental Benefits and Group Disability & Life.

Moreover, Cigna’s results should reflect growth in medical customers and specialty relationships, continued effective medical cost management, operating expense discipline and accretion from a low tax rate.

Its segment Global Healthcare is expected to deliver revenue growth led by higher contribution from Commercial Employer business, in both risk and ASO medical customers, particularly in its Select and Middle-market segments. Premium increases consistent with underlying cost trends and inclusive of the returns of the health insurance tax, and specialty contributions should also aid top-line growth. Earnings for the segment should be driven by continued effective medical cost management and a lower tax rate compared to 2017.

Another segment, Global Supplemental Benefits, should show business growth and continued strong operational performance. We expect the segment 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 a strongly managed talent. Its business in South Korea has been performing well and should contribute to the results.

Cigna has witnessed growth in its membership for the past many quarters and the trend continued in the second quarter of 2018, given its diversified product portfolio, a wide agent network and superior service. Enrollment should be driven by growth in the Select, Individual and Middle Market segments. Customer growth should be seen in both risk and ASO funding arrangements.

The company in the last quarter indicated that it might not conduct additional share repurchases prior to the closing of the Express Scripts transaction, which is slated for the end of 2018. Thus the company’s bottom line will be bereft of any gains that might have accrued from share buyback.

Earnings Surprise History

The company boasts an attractive earnings surprise history, having surpassed estimates in each of the trailing four quarters, with an average positive surprise of 15.74%. This is depicted in the chart below:

Cigna Corporation Price and EPS Surprise

Cigna Corporation Price and EPS Surprise | Cigna Corporation Quote

Earnings Whispers

Our proven model does not show that Cigna is likely to beat on earnings in the to-be-reported quarter as it does not possess the key components. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or at least 3 (Hold) for this to happen. This is not the case here as you will see below:  

Earnings ESP: The company’s Earnings ESP is -1.91%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Cigna has a Zacks Rank #3, which increases the predictive power of ESP, but its negative earnings ESP makes our surprise prediction difficult.

Stocks to Consider

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:  

DaVita Inc. (DVA - Free Report) is expected to report second-quarter 2018 earnings results on Aug 1. The company has an Earnings ESP of +0.86% and a Zacks Rank #2.

PRA Health Sciences, Inc. (PRAH - Free Report) is expected to report second-quarter earnings results on Aug 1. It has an Earnings ESP of +2.13% and a Zacks Rank #2.  You can see the complete list of today’s Zacks #1 Rank stocks here.

Express Scripts Holding Company (ESRX - Free Report) has an Earnings ESP of +0.46% and a Zacks Rank #3. The company is expected to report second-quarter earnings results on Aug 1.

Today's Stocks from Zacks' Hottest Strategies

It's hard to believe, even for us at Zacks. But while the market gained +21.9% in 2017, our top stock-picking screens have returned +115.0%, +109.3%, +104.9%, +98.6%, and +67.1%.

And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - 2017, the composite yearly average gain for these strategies has beaten the market more than 19X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.

See Them Free>>
 





 



More from Zacks Analyst Blog

You May Like