(Reuters) - Cigna Corp
(CI.N) raised its full-year earnings target on
Thursday, after reporting a better-than-expected quarterly profit, boosted by
its acquisition of pharmacy benefits manager Express Scripts last year.
FILE PHOTO: A screen displays the logo fro Cigna Corp. on the
floor at the New York Stock Exchange (NYSE) in New York, U.S., July 16, 2019.
REUTERS/Brendan McDermid
The company’s foray
into pharmacy benefits management (PBM) places it in direct competition with
CVS Health Corp (CVS.N) and UnitedHealth Group Inc (UNH.N), which also have similar units for
negotiating deals on prescription drugs.
Yet, Cigna is
confident of growing revenue from its health services unit that houses the new
PBM business. It expects earnings to rise at a long-term rate of 10% to 13% in
2020 and beyond.
Chief Executive
Officer David Cordani said given some negative accounting elements, such as the
return of the health insurance tax, 2020 growth would be calculated from a base
of $16.40 per share, implying adjusted earnings of $18.04 to $18.53 next year.
Analysts had forecast
earnings of $18.71 per share for 2020.
Stephens analyst Scott
Fidel said the higher Street estimate is, however, not an “apples to apples”
comparison with Cigna’s forecast as it has not included share repurchases and
some other potential accounting benefits in its outlook.
“This is something
that we deal with every year with how Cigna guides versus how the Street
models, but the company has ultimately ended up exceeding its preliminary
guidance framework on a highly consistent basis year after year.”
Bernstein analyst
Lance Wilkes called Cigna’s 2020 forecast “probably in line with consensus”, if
share repurchases and other items were included in estimates.
For 2021, the insurer
reiterated its earnings per share target of between $20 to $21.
In the reported
quarter, Cigna’s $52 billion acquisition of Express Scripts helped amplify
health services sales to $24.88 billion from $1.11 billion last year.
“Today’s PBM results
will... lead to greater confidence in the company’s ability to deliver on
full-year PBM guidance,” said Barclays analyst Steve Valiquette.
As Cigna added more
customers and raised premiums, revenue from its U.S. health insurance business
rose nearly 12% to $9.15 billion.
Cigna raised its
forecast for 2019 adjusted income from operations to between $16.80 and $17 per
share, from $16.60 to $16.90.
The company’s medical
care ratio, which compares the amount it spent on medical claims with income
from premiums, increased to 80.5%, but beat estimates of 80.86%.
Excluding items, Cigna
earned $4.54 per share, beating estimates of $4.36, according to IBES data from
Refinitiv.
Total revenue more
than tripled to $38.56 billion.
Reporting by Saumya Sibi Joseph and Tamara Mathias in Bengaluru
and Caroline Humer in New York; Editing by Shinjini Ganguli
Our Standards:The Thomson
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