Will Cigna (CI) Beat Earnings This Season? - Analyst Blog

Cigna Corp. CI is set to report first-quarter 2014 results before the opening bell on May 1. In the last reported quarter, the company's earnings missed the Zacks Consensus Estimate by 6.1%. Let's see how things are shaping up for this announcement. 

 

Factors Likely to Influence Q1 Results

 

Cigna is a niche player in the health insurance industry. The company's strengths are evident in multiple areas, such as robust revenue growth and a largely solid financial position with reasonable debt levels. 

 

The company's expanding international business with expansion in Turkey, India and China is also expected to aid earnings. Meanwhile, Cigna's growing U.S., global healthcare businesses, disability and Life business as well as global supplemental business is likely to contribute to its top-line growth. 

 

However, the business environment remains challenged due to a number of provisions of the Health Care Act, which has become applicable this year. Uncertainly relating to Medicare Advantage reimbursement levels, cost pressure resulting from reduction in hospital reimbursement levels due to government cuts and implementation challenges in public exchanges are expected to induce volatility to the company's earnings. 

 

Earnings Whispers?

 

Our proven model does not conclusively show that Cigna is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. However, that is not the case here as you will see below. 

 

Zacks ESP:  With Cigna's Most Accurate estimate pegged at $1.53, in line with the Zacks Consensus Estimate, Zacks ESP is 0.00%. 

 

Zacks Rank: Cigna's Zacks Rank #3 (Hold) increases the predictive power of a positive surprise. However, when combined with a 0.00% ESP makes surprise prediction difficult. We caution against stocks with Zacks #4 and #5 Ranks (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing a negative estimate revision momentum.

 

Other Stocks to Consider

 

Here are some other companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:  

 

Primerica Inc. PRI, earnings ESP of +1.22% and a Zacks Rank #2 (Buy). 

 

RenaissanceRe Holdings Ltd. RNR, earnings ESP of +3.15% and a Zacks Rank #1 (Strong Buy).

 

ACE Ltd. ACE, earnings ESP of +1.41% and Zacks Rank #2 (Buy).