Wachovia Downgrades Aetna (AET) to Market Perform; Valuation Range $26 to $30

June 3, 2009 9:26 AM EDT

Wachovia downgrades Aetna Inc. (NYSE: AET) from Outperform to Market Perform. Valuation Range: $26 to $30

Wachovia analyst says, "Aetna reduced the 2009 EPS outlook to a range of $3.55-3.70 from the prior range of $3.85-3.95, a 6-7% reduction. The EPS cut is due to higher commercial medical costs ($0.20) and lower Medicare revenue ($0.15), partially offset by lower share count and lower SG&A expense (+ $0.10). We have lowered our 2009E EPS to $3.48 from $3.83 and our 2010E EPS to $3.89 from $4.16...We are concerned that industry-wide margin pressure that hit most of the sector in 2008, has caught up with Aetna in 2009. Further, the average EPS cut in 2008 was 34% and most companies cut EPS more than once. Both of these data points leave us concerned that AET could cut EPS again in 2009...Yet, when valuations for each company are cheap vs. historic averages, we think relative valuation comparisons are less meaningful. Our top picks remain Humana (NYSE: HUM), because we think the Medicare business is undervalued, and; Coventry (NYSE: CVH) because it still trades at a big discount to normalized EPS."

To see more analyst ratings on AET Click Here.

Aetna Inc. (Aetna) is a diversified healthcare benefits company.

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