Cigna Group (NYSE:CI) has continued to demonstrate its resilience and growth potential through two key pillars: strategic acquisitions and a strong financial position. Additionally, the company’s robust 2023 guidance provides further support for the stock.
Price Performance and Favorable Style Score
Over the past six months, Cigna stock has gained 3.8%, outperforming the industry’s growth of 3.1%.
CI is well-positioned for growth, as indicated by its impressive VGM Score of A, where V stands for Value, G for Growth, and M for Momentum. This score is a comprehensive blend of these three crucial factors.
Rising Estimates
The Zacks Consensus Estimate for CI’s 2023 earnings and revenues stands at $24.8 per share and $191.6 billion, respectively, reflecting an impressive improvement of 6.6% and 6.1% from the previous year. Moreover, Cigna has consistently surpassed earnings estimates over the past four quarters, with an average beat of 3.6%.
Optimistic Guidance for 2023
In the coming year, Cigna anticipates adjusted revenues to reach at least $190 billion, indicating a growth rate of at least 5.2% compared to the 2022 reported figure. Adjusted earnings per share are projected to be no less than $24.70, suggesting a minimum growth rate of 6.1% from the 2022 figure.
Business Tailwinds
Cigna’s revenue streams primarily originate from pharmacy services and premiums. The company is set to benefit from an expanding specialty business and a growing customer base, both of which are expected to bolster pharmacy revenues and premiums. Cigna is also projecting an increase of at least 1.4 million medical customers in 2023.
Cigna’s success is underpinned by its two growth platforms, Evernorth and Cigna Healthcare. The Evernorth platform experiences growth through a robust specialty pharmacy services suite, while the Cigna Healthcare unit thrives on its extensive customer base in the U.S. Government and U.S. Commercial sectors.
Furthermore, Express Scripts, Cigna’s pharmacy benefits business, is poised to drive pharmacy revenues through its strong supply chain, care, and clinical management programs, and the addition of three biosimilars to its extensive formulary. The flagship specialty pharmacy, Accredo, is expected to witness accelerated growth, contributing significantly to the Evernorth segment. The company anticipates mid-single digits and mid-to-high single-digit growth in the third and fourth quarters, driven by increased adoption of biosimilars.
Cigna’s U.S. Commercial business is well-positioned for growth, benefiting from its competitive position and strong customer base. Meanwhile, the U.S. Government business and International business are expected to maintain their growth trajectory through high-quality plans and geographic expansion. The aging U.S. population is also expected to sustain strong demand for Medicare plans within the Government business.
In addition to a robust premium inflow, Cigna Healthcare benefits from ongoing product expansions and new collaborations with renowned healthcare systems.
Acquisitions as Growth Drivers
Cigna strategically employs acquisitions to enhance its suite of solutions, expand its capabilities, enter new markets, and strengthen its presence in existing ones. The company is on track to implement its Centene contract beginning in 2024. Collaboration with CarepathRx Health System Solutions aims to accelerate and expand pharmacy care delivery, benefitting Cigna Healthcare and Evernorth’s clients.
Solid Financial Position
Cigna maintains a growing cash balance and strong cash-generating capabilities, enabling it to invest in business growth and deploy capital prudently through share repurchases and dividend payments. In February 2023, the company approved a 10% increase in its quarterly dividend. With a dividend yield of 1.7%, surpassing the industry average of 1.4%, Cigna is committed to delivering value to its shareholders. The company also expects to generate an operating cash flow of at least $9.5 billion in 2023.
Key Concerns
While Cigna’s prospects appear promising, there are some factors that have recently impacted the stock’s growth. Rising pharmacy and service costs, as well as medical expenses and other benefit-related costs, have put pressure on the company’s margins. However, it is important to note that Cigna has devised a systematic and strategic plan to address these challenges, with a focus on achieving long-term growth.
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