On Monday, Cantor Fitzgerald maintained its Overweight rating and $372.00 price target for Cigna Corporation (NYSE:CI), traded on the New York Stock Exchange under the ticker NYSE:CI. The firm's positive stance is influenced by the anticipated growth of Cigna's Evernorth business and the upcoming investor day on Thursday, March 7, 2024.
Cantor Fitzgerald's outlook is based on the potential for Cigna's earnings to increase significantly by 2025 and 2026, driven by the performance of Evernorth. The analyst projected that the investor day event in New York City will highlight this aspect, acting as a positive catalyst for the company.
The firm also believes that the general market is underestimating the earnings boost Cigna will experience once the $30 billion Centene Corporation (NYSE:CNC) contract is fully operational. It is expected that Evernorth could see an earnings increase of $600 million to $1.05 billion from the CNC contract in 2025 compared to 2024.
Even with conservative estimates of core earnings growth, the 2025 adjusted operating income (AOI) could reach $8 to $8.6 billion, surpassing the consensus of $5.7 billion.
The CNC contract is anticipated to be earnings-neutral in 2024 and achieve target margins by 2025. Cantor Fitzgerald estimates that the target margins for large accounts like CNC will range from 2% to 3.5%, which is lower than Cigna's long-term guidance of 4.5% to 5.5%. This suggests that there is potential for margin growth in Cigna's core business.
The firm also speculated that if Cigna's management maintains the long-term margin guidance after securing the CNC contract, it indicates the possibility of further margin expansion in the core book for 2025 and 2026. This would be an additional boost to the firm's earnings estimates, which already sit at the lower end of the projected range.
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