Cigna (CI) Stock Gaining on Humana Merger Speculation

NEW YORK (TheStreet) -- Shares of Cigna Corp. (CI) are higher by 3.24% to $140.27 in late afternoon trading on Friday, following reports suggesting the company is looking into acquiring fellow health insurer Humana (HUM).

Cigna is said to have approached Humana, which earlier today was reported to be looking into selling itself, regarding a potential deal, sources told Bloomberg.

If Cigna were to purchase Humana it would catapult the company into the lead in the Medicare Advantage policies market, Bloomberg noted.

Currently Cigna is behind UnitedHealth Group (UNH), Humana, Anthem (ANTM), and Aetna (AET) in that market with less than 500,000 customers in that plan.

The majority of Humana's revenue comes from its patients using Medicare, The Wall Street Journal reports. Earlier in the day The Journal said Humana is working with Goldman Sachs (GS) as it enters the earlier stages of exploring a sale. Aetna is also said to have approached Humana. 

Separately, TheStreet Ratings team rates CIGNA CORP as a Buy with a ratings score of A+. TheStreet Ratings Team has this to say about their recommendation:

"We rate CIGNA CORP (CI) 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, largely solid financial position with reasonable debt levels by most measures, notable return on equity, good cash flow from operations and solid stock price performance. We feel its strengths outweigh the fact that the company shows low profit margins."

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 13.3%. Since the same quarter one year prior, revenues rose by 11.4%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The current debt-to-equity ratio, 0.55, is low and is below the industry average, implying that there has been successful management of debt levels.
  • 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, CIGNA CORP's return on equity exceeds that of both the industry average and the S&P 500.
  • 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 49.08% 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, CI should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • CIGNA CORP has improved earnings per share by 6.3% 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, CIGNA CORP increased its bottom line by earning $7.82 versus $5.20 in the prior year. This year, the market expects an improvement in earnings ($8.54 versus $7.82).
  • You can view the full analysis from the report here: CI Ratings Report

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