Aetna (AET) Stock Rebounds, Backs Outlook Amid Affordable Care Act Concerns

Aetna (AET) stock is up in afternoon trading on Friday, as the company maintains its full-year profit expectations after UnitedHealth Group (UNH) cut its forecast yesterday, citing 'Obamacare.'
By Rachel Graf ,

NEW YORK (TheStreet) -- Aetna (AET) stock is rallying 4.72% to $104.67 in afternoon trading on Friday, as the company reiterates its 2015 profit outlook a day after UnitedHealth Group (UNH) lowered its 2015 earnings forecast on concerns surrounding the Affordable Care Act's exchanges.

UnitedHealth, the biggest U.S. health insurer, added that it might withdraw from the Affordable Care Act's exchanges.

Aetna said that its individual insurance business, including the plans created by the Affordable Care Act, performed within expectations through last month, Reuters reports.

The insurer backed its full-year 2015 earnings forecast. 

Aetna plans to participate on individual exchanges in 15 states during 2016, which will create "a footprint that we continue to believe can drive net membership growth," CEO Mark Bertolini said on an earnings call this month, the Wall Street Journal reports.

Aetna is a diversified health care benefits 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.

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