On May 29, 2015, health insurer Cigna Corp. CI surged to a 52-week high of $145.33. The rally in the stock was propelled by its consistently strong operating performance and increase in 2015 earnings estimate. About 6.3 million shares exchanged hands in the last trading session.
Over the past one-year period, the stock gained 57%, way above the 9.6% increase seen by the S&P 500 over the same time frame.
Growth Drivers
Cigna's strong first-quarter financial performance is the continuation of its track of solid results and attractive revenue and earnings growth.
Operating earnings of $1.96 per share comfortably beat the Zacks Consensus Estimate of $1.85.
The company’s top line grew 11% year over year to $9.5 billion and beat the Zacks Consensus Estimate of $9.1 billion. The improvement in revenues came from higher contribution by its segments, namely Global Health Care, Global Supplemental Benefits and Group Disability and Life.
Investors are optimistic on the stock given that Cigna delivered a positive surprise in 10 out of past 11 quarters, with an average beat of 8.3%.
Investors also view the stock favorably given that its 2015 earnings guidance was pulled up during the first-quarter earnings release. The company now projects income from operations in the range of $2.12 billion to $2.21 billion, or $8.15 to $8.50 per share compared with the earlier guidance of $2.1 billion and $2.2 billion, or $8.00 to $8.40 per share. The company also expects global medical customer growth of 2% to 4% compared with the earlier projection of 1% to 3% growth.
Cigna’s recent acquisition of QualCare Alliance Networks, Inc. also led to the upside in the stock. QualCare added 200,000 new customers to Cigna’s base in the last reported quarter.
Cigna’s intelligent use of capital via share buyback and increase in dividend also make it a favored stock.
Estimate Revisions Show Strength
Driven by optimism surrounding the stock, the Zacks Consensus Estimate for 2015 earnings per share moved up 1.1% to $8.52 over the last 30 days.
Zacks Rank & Stocks to Consider
Cigna carries a Zacks Rank #3 (Hold). Some better-ranked players in the space are Radian Group Inc. RDN, James River Group Holdings, Ltd. JRVR and Zurich Insurance Group Ltd ZURVY. All these stocks carry a Zacks Rank # 2 (Buy).
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