Can Aetna (AET) Shake Its 'Serial Disappointer' Tag?

Earlier today, health insurer Aetna (NYSE: AET) continued its disappointing ways, giving investors a double whammy of lower-than-expected second quarter results and again lowered its full year earnings guidance.

Less than two months after its June 2nd earnings warning, Aetna warned again that upward pressure on medical costs will led to lower than expected earnings for 2009. Aetna now sees 2009 EPS of $2.75-$2.90, which was lower than its recently revised range $3.55 to $3.70. Prior to June, Aetna saw 2009 EPS of $3.85 to $3.95. The new 2009 EPS range is not only well below the Wall Street consensus of $3.53, it is considerably below the 'Street Low' EPS estimate of $3.30.

For the second quarter, Aetna missed ratcheted-down earnings estimates --- coming in with earnings of $0.68/share which was below the consensus of $0.78/share. In fact, Aetna even missed the 'Street Low' EPS estimate of $0.73.

A number of analysts weighed in on the results, with some calling the new lowered guidance "achievable". Analysts at Leerink Swann and Deutsche Bank both called this new EPS guidance "conservative". In addition, Deutsche Bank sees a near-term catalyst for the stock with the potential sale of the PBM unit, as was reported in today's Wall Street Journal. Both sell-side firm's are maintaining their Buy ratings on Aetna on the sell-off.

Analyst at Goldman Sachs said while it is tempting to conclude that this is the "last shoe" to drop, they are maintaining their Sell rating on Aetna. Goldman said using the group multiple of 8x Aetna's EPS run-rate of $2.25-$2.50 it would imply a stock price below $20, while using a higher 10x multiple this would suggest a stock price of $23-$25. Currently Aetna trades at $25.50, down 3% on the session.

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