Aetna Could Outperform Market After Selloff, With Or Without Humana: RBC Capital

Shares of Aetna Inc AET are up roughly 3 percent on Tuesday trading, after RBC Capital Markets upgraded its stock from Sector Perform to Outperform, boosting its price target from $159.00 to $162.00.

In a report issued Tuesday morning, analysts Frank G. Morgan, Ben Hendrix and Anton Hie explain that the upgrade was motivated by their comfort with the probability of the Humana Inc HUM acquisition, and the belief that, “even without Humana, Aetna's outlook is attractive at current levels.”

They explain that the company’s stock was down (at the time of the report) more than 15 percent from the all-time high it had hit in mid-June, even in spite of the announcement of the Humana purchase and the recent posting of “a strong beat-and-raise.” These elements combined with the recent pullback in the overall market have led the experts to re-evaluate their rating.

They continued to expound, “The organic story remains solid and long-term fundamentals are compelling. Reflecting confidence in the underlying strength of the business, management increased earnings guidance again, as it has over the past six quarters.”

Moreover, RBC’s analysis suggests the acquisition of Humana “should pass antitrust scrutiny and remains attractive even if some divestitures are required.”