Aetna (AET) Stock Climbing on Merger Speculation

NEW YORK (TheStreet) -- Shares of Aetna Inc. (AET) are higher by 4.71% to $121.32 in late afternoon trading on Monday, as insurance stocks are soaring on reports that several mergers could be in the works.

Aetna may be a takeover target for UnitedHealth Group (UNH), who is also said to be considering a Cigna (CI) deal, sources told The Wall Street Journal.

Cigna has already been approached by Anthem (ANTM) in regards to a merger, The Journal added. Anthem is said to have made two takeover bids for Cigna in the past 10 days. The company is reported to have rejected Anthem's bid. 

Larger health insurers have been expected by analysts to start looking towards mergers for a while now, in order to give themselves a competitive edge as the industry continues to change, The Journal noted.

The speculation over talks regarding Anthem and Cigna means that the next big deal within the health insurance sector won't necessarily be a sale of Humana (HUM), as is the expectation of many with an eye on the industry, according to The Journal.

If Anthem and Cigna were to merge it would eliminate two possible Humana buyers and leave the company with what The Journal has described as "only one major dance partner" in Aetna.

So far today, 4.93 million shares of Aetna have exchanged hands as compared to its average daily volume of 1.97 million shares.

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, growth in earnings per share, increase in net income, revenue growth and attractive valuation levels. 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:

  • 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 45.65% 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 20.9% 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 $5.66 versus $5.35 in the prior year. This year, the market expects an improvement in earnings ($7.40 versus $5.66).
  • The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the Health Care Providers & Services industry average. The net income increased by 16.8% when compared to the same quarter one year prior, going from $665.50 million to $777.50 million.
  • Despite its growing revenue, the company underperformed as compared with the industry average of 13.1%. Since the same quarter one year prior, revenues slightly increased by 7.8%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • You can view the full analysis from the report here: AET Ratings Report

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