Cigna (CI) Down 6.5% Since Last Earnings Report: Can It Rebound?

A month has gone by since the last earnings report for Cigna (CI). Shares have lost about 6.5% 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 the most recent earnings report in order to get a better handle on the important drivers.

Cigna Beats Q1 Earnings Estimates, Raises 2019 View

Cigna Corp. came up with adjusted earnings of $3.9 per share in first-quarter 2019, surpassing the Zacks Consensus Estimate by 4.3%. However, the same was down 5.1% year over year.

Cigna posted revenues of $33.43 billion and missed the Zacks Consensus Estimate by 1.5%. Revenues grew 192% year over year on the acquisition of Express Scripts (NASDAQ:ESRX).

Premiums were up 11% year over year to $10 billion while fees increased 79% to $2.45 billion.

The SG&A expense ratio was 9.3% for first-quarter 2019, down from 23.5% for the first quarter of 2018. 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 224,000 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.

Strong Segmental Performance

Health Services: Operating revenues of $22.4 billion were up from $1.07 billion in the year-ago quarter owing to the acquisition of Express Scripts
Adjusted operating earnings were $994 million, up from $83 million in the year-ago quarter, driven by organic growth in pharmacy customers since the beginning of the year, and strong adjusted pharmacy script volumes and performance in specialty pharmacy care.

Integrated Medical: Operating revenues of $9.2 billion were up 12.8% year over year due to organic growth in Commercial and Government business.
Operating income increased 15.6% from the year-ago quarter to $1.2 billion due to strong medical and specialty contributions and continued effective medical cost performance.

International Markets: Operating revenues of $1.39 billion were up 4% year over year, reflecting continued business growth, partially offset by some impact from unfavorable foreign currency movements.
Adjusted operating income decreased 5.1% year over year to $206 million due to unfavorable foreign currency impact.

Global Disability and Life: Operating revenues of $1.3 billion were up 2% year over year. However, operating income decreased 28% year over year to $84 million, due to unfavorable disability claims, partly offset by strong life results.

Cigna’s debt-to-capitalization ratio improved to 48.8% at Mar 31, 2019, from 50.9% at the end of Dec 31, 2018.

2019 Guidance Update

For 2019, the company expects earnings per share in the range of $16.25-$16.65, up from the prior range of $16-$16.50.

Total revenues are expected in the range of $132.5-$134.5 billion (versus $131.5-$133.5 billion earlier) and medical customers are projected to grow within 0.3-0.4 million lives.

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

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

VGM Scores

At this time, Cigna has a nice Growth Score of B, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. 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 these revisions indicates a downward shift. Notably, Cigna has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.