Aetna (AET) Stock Gaining on UnitedHealth Takeover Offer

NEW YORK (TheStreet) -- Shares of Aetna (AET) are higher by 2.46% to $124 in pre-market trading on Tuesday morning, following a report from The Wall Street Journal that UnitedHealth Group (UNH) approached the health insurer regarding a takeover deal that could value Aetna at over $40 billion.

UnitedHealth approached Aetna via a letter within the past few days, sources told The Journal, adding it was unclear what, if any, response was given.

Aetna and other insurers are said to be considering buying Humana (HUM). The Journal reported in May that Humana is looking into strategic alternatives, which includes the possibility of a sale.

Some companies within the health insurance sector are in the process of merger talks as they try to keep up with changes in the industry that will allow them to cut costs. 

"They are all trying to figure out how five becomes three. We don't know which is merging with which but that seems to be the goal. Terrible for the consumer but will the government even realize it?" TheStreet's Jim Cramer, Portfolio Manager of the Action Alerts PLUS charitable trust portfolio said. 

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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