Sterne Agee Lower Rating On Cigna Corporation

Sterne Agee lowered its rating on Cigna Corporation CI from Buy to Neutral in a report issued Tuesday with a $110 price target.

Analyst Brian Wright continued to “view CI's international assets as under appreciated,” however, he was “increasingly concerned about the company's ability to achieve either its commercial MCR or Medicare MCR targets and are thus lowering our rating to Neutral from Buy on elevated execution risk in 2H14.

Wright also noted that “following 2Q14 reports, we lowered our 2014 EPS estimate to $7.10, which is well below the $7.37 consensus estimate as a result of medical care ratio (MCR) pressures in both its guaranteed cost and Medicare businesses in 2Q14.”

The report conclude that “the guaranteed cost MCR deteriorated 690 bps year over year in 2Q14 and cost trend commentary has subtly changed.  Taken in conjunction with Aetna's AET recent commentary about outpatient cost trend coming in at the higher end of the previously expected range, we are being more sensitive to such subtleties.”

Cigna Corporation recently traded at $86.39, down 1.50 percent