Sterne Agee CRT Upgrades Anthem And Cigna To Buy, Sees 24% Upside

In a report published Monday, Sterne Agee CRT analyst Brian Wright upgraded the ratings on

and

from Neutral to Buy. Anthem preannounced impressive results for 2Q15, which positions the company well to surpass its 2015 EPS guidance of more than $10. "We see ANTM shares as providing considerable upside on their own accord even without the potential highly accretive CI acquisition at just 12.6x our standalone 2017 estimates," analyst Brian Wright wrote. The EPS estimates for 2015 and 2016 have been raised from $10.29 to $10.55 and from $11.21 to $11.26, respectively, to reflect "the better starting off point for medical costs in 2Q15, which more than offset the higher share count for the next 18 months." The EPS estimate for 2017 has been reduced from $12.30 to $11.93 to reflect the halting of the share buyback program ultimately overcoming "the favorable medical cost dynamic." Sterne Agee CRT has a price target of $185 for Anthem. Referring to Cigna, Wright said that its risk-reward profile was "exceptionally compelling" in view of its announced transaction with Anthem. "The potential upside on the deal closing even at the currently depressed ANTM price is 24%," the analyst added. The EPS estimate for 2015 has been raised from 8.45 to $8.76 to reflect the $0.26 beat in 2Q15. The EPS estimates for 2016 and 2017 have been reduced from $9.49 to $9.44 and from $10.35 to $10.17 to reflect the halting of share repurchases until the acquisition is closed. Sterne Agee CRT has a price target of $190 for Cigna.