Cigna Group (CI) shares have been on a remarkable run, gaining a substantial 25.6% in the past year. This impressive performance overshadows the industry’s growth of 18.2% during the same period. The Medical sector and the S&P 500 composite index have also seen healthy rallies, gaining 9.3% and 21.2%, respectively. Cigna’s robust performance can be attributed to several key factors: a solid membership base, the strong performance of its Evernorth unit, strategic acquisitions, and a growing cash reserve.
Currently trading at $357.40, the stock is just 3.6% below its 52-week high of $370.64. This close proximity to its peak signifies the strong investor confidence and market optimism surrounding Cigna’s future prospects. The health insurer, currently carrying a Zacks Rank #3 (Hold), has a consistent track record of beating earnings estimates in each of the past four quarters, with an average surprise of 3.83%.
Robust Growth Prospects Fueling Optimism
The Zacks Consensus Estimate for Cigna’s 2024 earnings is projected at $28.48 per share, representing a 13.5% increase from the 2023 figure. Revenue projections for 2024 are equally impressive, with a consensus mark of $239.1 billion, implying a 22.4% growth from the previous year. Looking ahead to 2025, the consensus estimate for earnings stands at $31.80 per share, suggesting an 11.7% improvement from the 2024 estimate. Revenue is expected to reach $246.5 billion, representing a modest 3.1% increase from the 2024 forecast. These optimistic projections underscore Cigna’s strong growth trajectory.
Cigna’s Business Tailwinds: Driving Growth
Cigna’s success is rooted in its strong growth platforms, Evernorth and Cigna Healthcare. Evernorth, fueled by a diverse range of specialty pharmacy services, has significantly boosted pharmacy revenues for the parent company. In the first half of 2024, pharmacy revenues experienced a remarkable 31.8% year-over-year increase.
Meanwhile, Cigna Healthcare is strengthened by its robust customer base across the United States. This segment is poised for long-term average annual adjusted earnings growth within the range of 7-10%. Cigna’s expanding customer base leads to higher premiums, a critical revenue source for health insurers. As of June 30, 2024, Cigna served a total of 19 million medical customers. The aging US population is expected to drive continuous demand for Cigna’s Medicare plans in the years to come.
Beyond premium growth, Cigna Healthcare benefits from ongoing product enhancements and new or expanded partnerships with prominent healthcare systems. Cigna strategically acquires companies to bolster its solutions and capabilities, expand its geographical reach, and solidify its market presence. Consistent with its focus on high-growth platforms, Cigna has divested its non-core health units, streamlining its operations and focusing its resources.
Financial Strength: A Key Differentiator
Cigna’s robust cash balance and substantial cash generation abilities empower the company to invest in business expansion, strategically allocate capital for share buybacks, and provide dividends to shareholders. Management anticipates generating approximately $60 billion in cash flow over the next five years, providing ample financial flexibility for future growth initiatives.
Stocks to Consider: Other Healthcare Leaders
While Cigna stands out as a compelling investment, other well-ranked stocks within the Medical space deserve consideration. These include Universal Health Services, Inc. (UHS), The Ensign Group, Inc. (ENSG), and HCA Healthcare, Inc. (HCA).
Universal Health, currently boasting a Zacks Rank #1 (Strong Buy), has a consistent track record of surpassing earnings estimates, with an average surprise of 14.58% over the past four quarters. The consensus estimate for UHS’s 2024 earnings projects a remarkable 51% rise from the previous year. Revenue projections for 2024 indicate a 9.8% increase from the previous year.
Ensign Group, carrying a Zacks Rank #2 (Buy), has also consistently exceeded earnings estimates, with an average surprise of 1.40% in the trailing four quarters. The consensus estimate for ENSG’s 2024 earnings forecasts a 14.1% increase from the previous year. Revenue is projected to improve by 13.1% from the previous year.
HCA Healthcare, another Zacks Rank #2 (Buy) company, has a solid track record of earnings performance, surpassing estimates in three out of the past four quarters. The consensus estimate for HCA’s 2024 earnings predicts an 18.2% improvement from the previous year. Revenue projections for 2024 indicate a 8.9% growth from the previous year.
Overall, Cigna’s strong performance, fueled by strategic growth initiatives and a solid financial foundation, makes it a compelling investment prospect in the healthcare sector. Investors seeking exposure to the healthcare industry should consider Cigna alongside other well-ranked companies such as Universal Health, Ensign Group, and HCA Healthcare.
