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Will Higher Membership, Revenues Aid Cigna (CI) Q4 Earnings?
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Multiline insurer Cigna Corp. (CI - Free Report) is scheduled to release fourth-quarter earnings on Feb 1, before the opening bell.
The performance should reflect growth in total enrollment and specialty relationships, continued effective medical cost management and operating expense discipline, and strong capital management.
Let’s Take a Look at the Factors Influencing Q4 Results
Higher Premium in Health Care Segment: We expect to see an increase in premium and fees in the company's Health Care segment driven by customer growth and specialty contributions from the Commercial employer group. The Zacks Consensus Estimate for the same is pegged at $6.06 billion, up 5.4% year over year.
Membership Growth: Cigna has been growing its membership for the past many quarters. The trend continued in the first nine months of 2017, which saw membership increase by 4%. We expect a rise in membership in the fourth quarter too, given Cigna’s diversified product portfolio, a wide range of agent networks and superior service.
For 2017, the company expects global medical customers to grow by 650,000 lives year over year (up from the previous guided range of 500,000-600,000 lives) reflecting strong growth across its Commercial market segments. The Zacks Consensus Estimate for total membership for the fourth quarter is 15.86 million, up 4.3% year over year.
Higher Revenues From Global Supplemental Business: Earnings and revenues in the segment have been increasing consistently for the past several years, with the first nine months of 2017 being no exception. We expect the segment to grow in the fourth quarter on the back of its leading innovations, direct-to-consumer distribution capabilities and easy to understand, affordable products that are designed to fill in gaps in coverage, and locally licensed and strongly managed talent. The Zacks Consensus Estimate for revenues from this unit is $976 million, up 11.8% year over year.
Share Buyback: The company’s strong business generates sufficient cash flows from operations, which enables it to make strategic mergers and acquisitions, buy back shares and pay out dividend. Shares bought back by the company during the fourth quarter would lift its bottom line.
Factors Offsetting Earnings Growth
Increase in Expenses: The company’s expenses have been increasing at a rate higher than growth in revenues, which continues to bother us. Though benefits and expenses increased 3.2% in the first nine months of 2017, lower than 4.6% growth in revenues in the same time period, we will not be surprised to see an increase in expenses in the fourth quarter as the company invests further in business growth.
Low Medicare Growth: For the nine months ended Sep 30, 2017, Medicare enrollment and consolidated revenues were materially impacted due to the company’s inability to participate in the 2017 annual enrollment due to CMS sanctions. We expect that trend to continue in the fourth quarter. The Zacks Consensus Estimate for Medicare and Medicaid membership is 485,000, down 14.3% year over year.
Earnings Surprise History
Cigna boasts an attractive earnings surprise history. It surpassed estimates in each of the four reported quarters with an average positive surprise of 14.6%. This is depicetd in the chart below:
Our proven model does not conclusively show that Cigna is likely to beat on earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. But that is not the case here as you will see below.
Zacks ESP: Cigna has an Earnings ESP of -0.11%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Though Cigna carries a Zacks Rank #1, which increases the predictive power of ESP, its negative ESP makes surprise prediction difficult. We caution against Sell-rated stocks (#4 or 5) going into an earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks That Warrant a Look
Here are some companies that possess the right combination of elements to beat estimates this quarter:
WellCare Health Plans, Inc. has an Earnings ESP of +7.49% and a Zacks Rank of 3. The company is expected to report fourth-quarter earnings on Feb 6.
Medpace Holdings, Inc. (MEDP - Free Report) has an Earnings ESP of +0.64% and a Zacks Rank of 2. The company is expected to report fourth-quarter earnings on Feb 26.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
Image: Bigstock
Will Higher Membership, Revenues Aid Cigna (CI) Q4 Earnings?
Multiline insurer Cigna Corp. (CI - Free Report) is scheduled to release fourth-quarter earnings on Feb 1, before the opening bell.
The performance should reflect growth in total enrollment and specialty relationships, continued effective medical cost management and operating expense discipline, and strong capital management.
Let’s Take a Look at the Factors Influencing Q4 Results
Higher Premium in Health Care Segment: We expect to see an increase in premium and fees in the company's Health Care segment driven by customer growth and specialty contributions from the Commercial employer group. The Zacks Consensus Estimate for the same is pegged at $6.06 billion, up 5.4% year over year.
Membership Growth: Cigna has been growing its membership for the past many quarters. The trend continued in the first nine months of 2017, which saw membership increase by 4%. We expect a rise in membership in the fourth quarter too, given Cigna’s diversified product portfolio, a wide range of agent networks and superior service.
For 2017, the company expects global medical customers to grow by 650,000 lives year over year (up from the previous guided range of 500,000-600,000 lives) reflecting strong growth across its Commercial market segments. The Zacks Consensus Estimate for total membership for the fourth quarter is 15.86 million, up 4.3% year over year.
Higher Revenues From Global Supplemental Business: Earnings and revenues in the segment have been increasing consistently for the past several years, with the first nine months of 2017 being no exception. We expect the segment to grow in the fourth quarter on the back of its leading innovations, direct-to-consumer distribution capabilities and easy to understand, affordable products that are designed to fill in gaps in coverage, and locally licensed and strongly managed talent. The Zacks Consensus Estimate for revenues from this unit is $976 million, up 11.8% year over year.
Share Buyback: The company’s strong business generates sufficient cash flows from operations, which enables it to make strategic mergers and acquisitions, buy back shares and pay out dividend. Shares bought back by the company during the fourth quarter would lift its bottom line.
Factors Offsetting Earnings Growth
Increase in Expenses: The company’s expenses have been increasing at a rate higher than growth in revenues, which continues to bother us. Though benefits and expenses increased 3.2% in the first nine months of 2017, lower than 4.6% growth in revenues in the same time period, we will not be surprised to see an increase in expenses in the fourth quarter as the company invests further in business growth.
Low Medicare Growth: For the nine months ended Sep 30, 2017, Medicare enrollment and consolidated revenues were materially impacted due to the company’s inability to participate in the 2017 annual enrollment due to CMS sanctions. We expect that trend to continue in the fourth quarter. The Zacks Consensus Estimate for Medicare and Medicaid membership is 485,000, down 14.3% year over year.
Earnings Surprise History
Cigna boasts an attractive earnings surprise history. It surpassed estimates in each of the four reported quarters with an average positive surprise of 14.6%. This is depicetd in the chart below:
Cigna Corporation Price and EPS Surprise
Cigna Corporation Price and EPS Surprise | Cigna Corporation Quote
Here is What Our Quantitative Model Predicts:
Our proven model does not conclusively show that Cigna is likely to beat on earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. But that is not the case here as you will see below.
Zacks ESP: Cigna has an Earnings ESP of -0.11%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Though Cigna carries a Zacks Rank #1, which increases the predictive power of ESP, its negative ESP makes surprise prediction difficult.
We caution against Sell-rated stocks (#4 or 5) going into an earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks That Warrant a Look
Here are some companies that possess the right combination of elements to beat estimates this quarter:
Centene Corp. (CNC - Free Report) ) has an Earnings ESP of +1.24% and a Zacks Rank of 1. The company is expected to report fourth quarter earnings on Feb 6. You can see the complete list of today’s Zacks #1 Rank stocks here.
WellCare Health Plans, Inc. has an Earnings ESP of +7.49% and a Zacks Rank of 3. The company is expected to report fourth-quarter earnings on Feb 6.
Medpace Holdings, Inc. (MEDP - Free Report) has an Earnings ESP of +0.64% and a Zacks Rank of 2. The company is expected to report fourth-quarter earnings on Feb 26.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>