The analyst firm raised its 2015 EPS estimate for the health care plan provider to $7.30 a share from $6.93 a share, above consensus estimates of $7.11 a share.
Leerink analyst Ana Gupta said the higher price target "reflects what we expect will be a year of modest Commercial margin expansion by at least 25 bps in 2015 and reverses our EPS lowering after weak Commercial MLR performance in 3Q14. In the bull case, Commercial MLR could improve by 50 bps with 2015 EPS of ~$7.45 though we expect any potential for accelerating cost trend per capita would make that less likely."
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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 solid stock price performance, impressive record of earnings per share growth, increase in net income, revenue growth and notable return on equity. We feel these strengths outweigh the fact that the company shows weak operating cash flow."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 26.74% over the past year, a rise that has exceeded that of the S&P 500 Index. Regarding the stock's future course, although almost any stock can fall in a broad market decline, AET should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
- AETNA INC has improved earnings per share by 21.0% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, AETNA INC increased its bottom line by earning $5.35 versus $4.78 in the prior year. This year, the market expects an improvement in earnings ($6.69 versus $5.35).
- The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and the Health Care Providers & Services industry average. The net income increased by 14.6% when compared to the same quarter one year prior, going from $518.60 million to $594.50 million.
- Despite its growing revenue, the company underperformed as compared with the industry average of 19.9%. Since the same quarter one year prior, revenues rose by 13.0%. Growth in the company's revenue appears to have helped boost the earnings per share.
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Health Care Providers & Services industry and the overall market, AETNA INC's return on equity exceeds that of both the industry average and the S&P 500.
- You can view the full analysis from the report here: AET Ratings Report