It has been about a month since the last earnings report for Aetna . Shares have added about 7.2% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Aetna due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Aetna Q3 Earnings Beat Estimates, Membership Increases
Health insurer Aetna Inc.’s third-quarter 2018 earnings of $2.96 per share beat the Zacks Consensus Estimate by 4.2% and increased 21% year over year.
Total revenues of $15.39 billion increased 3% year over year and beat the Zacks Consensus Estimate by 1%.
The increase in adjusted earnings was primarily due to the favorable impact of the Tax Cuts and Jobs Act of 2017 (the TCJA) and higher pre-tax adjusted earnings in Aetna's Health Care segment, partially offset by lower adjusted earnings due to the Group Insurance sale which occurred during fourth-quarter 2017.
Medical membership of 22.1 million grew year over year led by increases in Aetna's Commercial ASC, Medicare and Medicaid products, partially offset by decreases in Aetna's Commercial Insured products.
The adjusted expense ratio was 17.7%, up 20 basis points year over year. The increase was primarily due to the reinstatement of the health insurer fee for 2018 and investment spending on Aetna's growth initiatives, partially offset by the continued execution of Aetna's expense management initiatives.
The effective tax rate was 27.4% for third-quarter 2018 compared with 33.4% in the year-ago quarter courtesy of the tax reform.
Total healthcare medical benefit ratio (MBR) fell 40 basis points year over year to 81.5%.
Total assets were $57.1 billion as of Sep 30, 2018, up 3.4% from the Dec 31, 2017 levels.
Long-term debt decreased 3% from the year-end 2017 levels to $21.8 billion.
Debt-to-capitalization ratio was 30.8% as of Sep 30, 2018 was down 620 basis points from Dec 31, 2017 levels.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
At this time, Aetna has a poor Growth Score of F, however its Momentum Score is doing a lot better with an A. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Aetna has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.