Top Business News

Return to Article

Aetna No Longer the Picture of Health

Jeanine Poggi

Are more reductions possible at Aetna(AET)? Analysts seem to think so.

The managed-care company lowered its full-year guidance on Tuesday and analysts said further outlook cuts are possible, sending shares in the company tumbling 6% to $25.64 in afternoon trading.

Aetna has been lauded in the past as the only major health insurer to not resort to guidance cuts. But, inevitably, the same issues that rivals like Cigna(CI) and Unitedhealth Group(UNH) have faced are now hitting Aetna.

Aetna now expects 2009 earnings to range of $3.55 and $3.70 per share, down from its prior guidance of $3.85 to $3.95 per share, as commercial medical costs rise and Medicare revenue is expected to be lower.

Wachovia analyst Matt Perry downgraded Aetna's stock to market perform from outperform, while Credit Suisse analyst Gregory Nersessian dropped it to underperform from neutral.

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

"Aetna has been the best-run managed-care company over the past few years, in our view," Perry wrote in a note on Wednesday. "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 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 in a note.