Aetna Guides Higher - Analyst Blog
December 15 2011 - 7:00AM
Zacks
Based on solid performances in
October and November, health insurer Aetna Inc.
(AET) raised the 2011 and 2012 expectations.
Aetna raised the 2011 earnings
expectation to $5.15 per share from $5.00 per share guided earlier.
The Zacks Consensus Estimate for 2011 is $5.04 per share, on the
conservative side. For 2012, Aetna now expects to deliver earnings
of $5.00 per share, in tune with the Zacks Consensus Estimate. The
expectation was raised from $4.80 per share.
Though the company has
raised the earnings expectation, it expects members from its
commercial administrative services contracts to be lower by 0.5
million in first quarter of 2012. Aetna believes large corporate
customers might choose plans with fixed costs due to soft economic
conditions.
Aetna also estimates
medical membership to increase to 18.4 million at fourth quarter
2011 end but then fall to 17.9 million at first quarter 2012 end.
However, the company expects the medical membership to grow over
the next nine months in 2012.
The company also expects
Medicare members to increase by 35,000 while Medicaid members to
decrease by 80,000 in the first quarter 2012.
However, despite the
increase in earnings expectation there was no spurt in the share
price. It is likely possible that the increased expectation
was offset by lower medical membership. The share price of
Aetna Inc. inched down 0.8% to close at $39.28 as on
Wednesday.
End of last month, another health
insurer UnitedHealth Group Inc. (UNH) guided 2012
earnings in the
range of $4.55 to $4.75 besides affirming its 2011 full year
guidance of $4.52 to $4.57.
Aetna reported a strong
third quarter and results exceeded the Zacks Consensus Estimate on
the back of declining utilization, strong performance across all
the product lines, disciplined pricing and medical cost trends. The
Zacks Consensus Estimate for fourth quarter 2011 is 86 cents per
share.
Over the last 7 days, only
1 analyst has raised his estimate upward while for 2012 none
revised their estimates. We expect the increased guidance might
encourage analysts to push their estimates higher.
Aetna is making very good
progress in its Medicare business. The lifting of the CMS sanctions
in June and the acquisition of Genworth's Medicare Supplement
business will advance its Medicare platform. Aetna is also
aggressively looking to generate incremental fee revenues by
managing the infrastructure necessary for care organizations. Aetna
is growing its international business to diversify its
risks.
We retain our long term Outperform
recommendation on Aetna Inc. The quantitative Zacks #1 Rank
(short-term Strong Buy rating) for the company indicates upward
pressure on the shares over the near term.
Based in Hartford, Connecticut
Aetna Inc is a provider of healthcare, dental, pharmacy, group
life, disability, and long-term care benefits.
AETNA INC-NEW (AET): Free Stock Analysis Report
UNITEDHEALTH GP (UNH): Free Stock Analysis Report
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