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Cigna Shares Slump Over 10% on Downbeat Earnings Outlook, Analysts Cut Price Targets

Cigna shares slumped over 10% on Thursday after the Bloomfield, Connecticut-based health insurer cautioned the COVID-19 pandemic would have a greater impact on the company’s full-year earnings, prompting several analysts to cut their one-year price targets.

The U.S. health insurer said its outlook for full-year 2021 adjusted revenues is projected to be at least $170 billion. Cigna’s outlook for full-year 2021 consolidated adjusted income from operations is at least $6.96 billion, or at least $20.20 per share. This outlook includes nearly $2.50 per share in net unfavourable impacts of COVID-19.

The medical care ratio (“MCR”) rose to 85.4% for the second quarter 2021 compares to 70.5% a year ago, reflecting significantly lower medical care in second quarter 2020 due to the onset of the COVID-19 pandemic, an acceleration in the return to historical levels of utilization, the direct costs of COVID-19 testing and treatment, and the pricing effect of the repeal of the health insurance industry tax, the company said in the press release.

Following this, Cigna shares slumped over 10% to $206.21 on Thursday.

The insurance company said its total revenues in the second quarter were $43.1 billion, and adjusted revenues were at $43.1 billion Adjusted income from operations for the second quarter was $1.8 billion, or $5.24 per share, beating the Wall Street consensus estimates of $4.96 per share.

Analyst Comments

“We see two key drivers of the Cigna (CI) sell-off following its 2Q results: 1) meaningfully higher-than-expected MLR trends in FY21, and 2) implied core growth in FY22 that we calc at ~3.5% vs. mgt’s 6-8% LT average target. Utilization remains a wild card for 2H21/FY22, and rightfully so. Still, even if we assume a modest haircut to mgt’s implied FY22 EPS (we’re not), we think the risk/reward is favourable with shares now trading at 9.0-9.5xFY22 EPS. Buy,” noted David Windley, equity analyst at Jefferies.

Cigna Stock Price Forecast

Fifteen analysts who offered stock ratings for Cigna in the last three months forecast the average price in 12 months of $294.64 with a high forecast of $321.00 and a low forecast of $230.00.

The average price target represents a 42.88% change from the last price of $206.21. From those 15 analysts, 13 rated “Buy”, two “Hold” while none rated “Sell”, according to Tipranks.

Morgan Stanley gave the stock price forecast of $321 with a high of $341 under a bull scenario and $139 under the worst-case scenario. The firm gave an “Overweight” rating the life insurer’s stock.

Several other analysts have also updated their stock outlook. Mizuho slashed the stock price forecast to $267 from $290. Credit Suisse lowered the price objective to $270 from $300. Citi cut the target price to $267 from $308. JPMorgan lowered the price target to $285 from $300.

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