"While 2015 EPS guidance was lower than expected, it embeds conservative cost trend assumptions that we believe set up more consistent EPS (out) performance. After 2015, AET has room to improve margins in several businesses and accelerate EPS growth," analysts said after the diversified healthcare benefits company's Investor Conference yesterday.
"AET's revenue targets of $80 billion plus/$100 billion plus in 2018/2020 imply 10% to 11% CAGR. This is fueled by growth from Government, Private & Public Exchanges, and pricing to trend. Margins likely drift lower from business mix, but capital deployment pushes EPS into the low double digits," analyst added.
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 34.54% 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 ($6.67 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