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Aetna Shares Keep Sliding After Outlook Lowered

The Associated Press

HARTFORD, Conn. (AP) — Shares of managed care company Aetna Inc. continued to slide Wednesday, a day after the company lowered its 2009 earnings guidance and left some analysts wondering whether more reductions are possible.

The Connecticut-based insurer said Tuesday after the market closed that it now expects 2009 operating earnings to range between $3.55 and $3.70 per share. That's down from earlier guidance of $3.85 to $3.95 per share.

Aetna officials cited rising commercial medical costs and lower projected Medicare revenue for the lower guidance. They said the company has seen an abrupt trend since late last year in its commercial insurance, where members are using either more services or higher-value services that affect costs.

Aetna also said its Medicare revenue will come in lower than expected essentially because its membership base isn't as sick as the insurer originally thought. That means the company will receive lower government payments for Medicare.

Wachovia analyst Matt Perry downgraded Aetna's stock to "Market Perform" from "Outperform," and Credit Suisse analyst Gregory Nersessian dropped it to "Underperform" from "Neutral."

Perry also lowered his 2009 earnings per share estimate for Aetna to $3.48 from $3.83.

Analysts polled by Thomson Reuters expect, on average, 2009 earnings of $3.60. That average, posted Wednesday, represented a 20-cent drop from prior day guidance of $3.80.

"Aetna has been the best run managed care company over the past few years, in our view," Perry wrote in a Wednesday research note. "Nevertheless, we think the risk profile has increased and we see better opportunities in the shares of several other companies."

Goldman Sachs analyst Matthew Borsch said in a separate note Wednesday that further earnings outlook reductions are "a distinct possibility."

"We believe underwriting pressures from last year are still catching up with Aetna, while the book for 2009 is underpriced," he wrote.

Aetna shares started tumbling in aftermarket trading after Tuesday's announcement. By Wednesday afternoon, they were down 5.6 percent, or $1.52, at $25.75.