Positive Operating Execution and SG&A Improvement Drives EPS Beat For Cigna Corp. (CI); Wedbush Remains Neutral
Wedbush maintained a Neutral rating on CIGNA (NYSE: CI), and cut the price target to $175.00 (from $186.00), following the company's 3Q15 earnings report. Adjusted EPS of $2.28, vs. consensus of $2.20, was driven by positive operating execution with better than expected SG&A improvement. 2015 EPS guidance was raised to $8.40-8.60 from $8.30-8.60 vs. consensus of $8.62.
Analyst Sarah James commented, "Adjusted EPS of $2.28 vs. consensus of $2.20 and our $2.20 driven by positive operating execution with better than expected SG&A improvement. Adjusted EPS excludes a $29M ($0.11 EPS) charge related to merger transaction costs, $7M investment gains, and $24M amortization of intangible assets. SG&A of 20.9% was 110bps below consensus of 22.0% and 13bps above our estimate of 20.8% driven by ongoing efficiency gains. MLR of 81%, (81.3% ex. PPD) was 80bps above Street Account consensus of 80.2%. Commercial MLR of 79.3% was 90bps higher than consensus of 78.4% from higher claims in their US individual business. Government MLR of 83.6% was 30bps lower than consensus of 83.9% from ongoing strong performance in MA and continued pressure in their PDP business. Revenue of $9.4B was $121M below consensus of $9.5B and $286.9M below our estimate of $9.7B. Membership (ex PDP) of 14.85M lives was 30K higher than consensus estimate of 14.82M lives driven by growth in their Regional, International, Select and MA businesses. Group disability margins increased 230bps y/y but decreased 170bps Q/Q to 11.5% due to improvement in claims experience. Parent cash of $250M was down $310M sequentially. DCP were 49.8 days, up 1.5 days sequentially."
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Shares of CIGNA closed at $132.81 yesterday.