Aetna (AET) Stock Falls as UnitedHealth Reconsiders Participation in Affordable Care Act
NEW YORK (TheStreet) -- Aetna (AET) stock is slipping by 7.74% to $30.50 in late morning trading on Friday, after UnitedHealth Group (UNH) said it expects losses due to the Affordable Care Act's exchanges.
UnitedHealth said it is considering dropping out of the exchanges completely, "in the most prominent signal so far of health insurers' struggles with the health law's marketplaces," the Wall Street Journal reports.
Additionally, UnitedHealth lowered its earnings outlook for 2015 to $6 per share from its previous range of $6.25 to $6.35 per share.
"In recent weeks, growth expectations for individual exchange participation have tempered industry-wide, co-operatives have failed, and market data has signaled higher risks and more difficulties while our own claims experience has deteriorated, so we are taking this proactive step," CEO Stephen Hemsley said in a statement today.
Other healthcare stocks including Cigna (CI) and Anthem (ANTM) are also down in late morning trading on Thursday.
Aetna is a healthcare insurance company based in Hartford, CT.
Separately, TheStreet Ratings team rates AETNA INC as a Buy with a ratings score of A. TheStreet Ratings Team has this to say about their recommendation:
We rate AETNA INC (AET) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, reasonable valuation levels, solid stock price performance, largely solid financial position with reasonable debt levels by most measures and good cash flow from operations. We feel its strengths outweigh the fact that the company has had sub par growth in net income.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Despite its growing revenue, the company underperformed as compared with the industry average of 10.2%. Since the same quarter one year prior, revenues slightly increased by 1.5%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- AETNA INC' earnings per share from the most recent quarter came in slightly below the year earlier quarter. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, AETNA INC increased its bottom line by earning $5.66 versus $5.35 in the prior year. This year, the market expects an improvement in earnings ($7.55 versus $5.66).
- The current debt-to-equity ratio, 0.49, is low and is below the industry average, implying that there has been successful management of debt levels. Despite the fact that AET's debt-to-equity ratio is low, the quick ratio, which is currently 0.62, displays a potential problem in covering short-term cash needs.
- Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period, despite the company's weak earnings results. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
- You can view the full analysis from the report here: AET
Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of Jim Cramer, TheStreet or any of its contributors.