Jefferies downgrades Cigna to Hold on mounting 2027 earnings headwinds

Investing.com -- Jefferies downgraded Cigna to Hold from Buy, arguing that a growing list of earnings headwinds and limited catalysts outweigh the stock's discounted valuation, while cutting its price target to $307 from $336.

The brokerage said consensus earnings expectations for 2027 remain too optimistic, citing uncertainty surrounding the strategic review of EviCore and the health insurance exchange (HIX) business, increasing pressure from reduced GLP-1 drug coverage, and mounting regulatory scrutiny of pharmacy benefit managers (PBMs). It lowered its 2027 earnings estimate to $32.77 per share, about 1% below consensus.

Jefferies said a potential sale or wind-down of EviCore and the HIX business could create a meaningful earnings gap. It estimates EviCore contributes $700 million to $1 billion in adjusted operating income, or $2.20-$3.10 per share, and warned that share buybacks would not fully offset the earnings dilution from a divestiture. Combined with stranded costs from exiting the HIX business, these factors could reduce 2027 adjusted operating income by roughly 10% versus current consensus expectations.

The brokerage also expects pressure from weight-loss GLP-1 drugs to intensify next year. After management disclosed a $20 million-per-quarter headwind beginning in the second half of 2026, Jefferies estimates further reductions in employer coverage could increase the 2027 earnings impact to about $126 million, weighing on the profitability of the company's pharmacy benefit services business.

Beyond GLP-1s, Jefferies highlighted risks from declining membership at key pharmacy benefit clients, including Medicaid, health insurance exchange and Medicare Part D plans, as well as a wave of state-level legislation targeting PBM pricing, transparency and ownership structures. The firm said these changes could cap margin expansion and create a longer-term overhang for the PBM business model.

While Jefferies acknowledged the stock trades at a depressed valuation of roughly 8.3 times consensus 2027 earnings, it said the discount is warranted given weaker growth prospects, limited catalysts for multiple expansion and ongoing execution risks as the company transitions to a rebate-free PBM model.

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