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Why Is Cigna (CI) Down 8.1% Since Last Earnings Report?

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A month has gone by since the last earnings report for Cigna (CI - Free Report) . Shares have lost about 8.1% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Cigna due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Cigna’s Q2 Earnings and Revenues Beat Estimates

Cigna came up with adjusted earnings of $4.3 per share in second-quarter 2019, surpassing the Zacks Consensus Estimate by 15.3%. Quarterly earnings were up 10.5% year over year.

Cigna posted revenues of $34.4 billion and beat the Zacks Consensus Estimate by 3%. Revenues grew 198% year over year on the acquisition of Express Scripts.

Among the revenue components, pharmacy revenues were $26.3 billion compared with $750 million in the year-ago quarter, premiums were up 8.9% year over year to $9.8 billion while fees increased 76% to $2.39 billion. The growth in pharmacy revenues was due to the acquisition of pharmacy benefit manager Express Scripts.

The SG&A expense ratio was 9% for second-quarter 2019, down from 23.5% in the year-ago quarter. The decline was mainly led by business mix changes resulting from the Express Scripts combination and the health insurance tax suspension.

The company’s medical enrollment grew by 207,000 lives from the prior-year quarter to 16.99 million customers, driven by growth in Government, Commercial and International markets. Moreover, the acquisition of Express Scripts, completed last December, led to an increase in Pharmacy and Medicare Part D members.

Cigna’s debt-to-capitalization ratio improved to 47.2% as on Jun 30, 2019 from 50.9% as of Dec 31, 2018.

2019 Guidance Update

For 2019, the company expects earnings per share in the range of $16.6-$16.9, up from the prior range of $16.25-$16.65.

Total revenues are expected in the range of $136-$137 billion (versus $132.5-$134.5 billion expected earlier) and medical customers are projected to grow by approximately 200,000.

Medical care ratio is expected in the range of 80.5-81.5%.
 

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month.

VGM Scores

At this time, Cigna has an average Growth Score of C, a grade with the same score on the momentum front. 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 B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. Notably, Cigna has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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