"While we do not take a view on the whether the transaction will complete, we expect the announcement will likely cause investors to refocus on CI's strong standalone fundamentals driven by a diversified business mix producing forecast mid-to-high single-digit revenue growth and 9–12 percent EPS growth," analyst Matthew Borsch wrote in a note.
If the proposed merger fails to take off, Borsch still thinks Cigna could deploy at least $9 billion, if it brought its debt leverage up to the level of UnitedHealth Group Inc UNH/Anthem/Aetna Inc AET (i.e., mid-40 percent debt/cap).
"This would be equivalent to more than one-quarter of CI's market cap and we estimate could be ~26 percent accretive to our 2018 EPS if used for share repurchase," Borsch highlighted.
The analyst expects EPS of $9.45 for 2016, $10.45 for 2017 and $11.75 for 2018.
Further, the analyst noted that Cigna's margins would be shielded from a "late-cycle" upturn in medical cost/utilization trend given its non-risk (ASO) weighted enrollment.
Borsche cut the price target to $165 from $170 as the analyst removed the M&A component from his model.
Shares of Cigna closed Thursday's regular trading at $140.32 and were seen up 2.14 percent just minutes after Friday's open, trading at $143.32.
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