Cigna Stock Gains 26% in a Year: What Lies Ahead for Investors?

Shares of The Cigna Group CI have gained 25.6% in the past year compared with the industry's 18.2% growth. The Medical sector and the S&P 500 composite index have rallied 9.3% and 21.2%, respectively, in the same time frame. CI has been well-poised for growth on the back of a sound membership base, solid Evernorth unit, acquisitions and expanding cash reserves. 

Currently priced at $357.40, the stock is just 3.6% below its 52-week high of $370.64. This proximity underscores investor confidence and market optimism about Cigna's prospects. 

The health insurer, presently carrying a Zacks Rank #3 (Hold), has an impressive record of beating estimates in each of the trailing four quarters, the average surprise being 3.83%.

Image Source: Zacks Investment Research

Robust Growth Prospects of CI Stock

The Zacks Consensus Estimate for Cigna's 2024 earnings is pegged at $28.48 per share, which indicates a 13.5% increase from the 2023 figure. The consensus mark for revenues is $239.1 billion, which implies 22.4% growth from the year-ago figure. 

The Zacks Consensus Estimate for 2025 earnings is pegged at $31.80 per share, which implies an 11.7% improvement from the 2024 estimate. The consensus mark for revenues is $246.5 billion, implying a 3.1% rise from the 2024 estimate.

Cigna's Business Tailwinds

Cigna's performance is underscored its strong growth platforms, Evernorth and Cigna Healthcare. Evernorth is propelled by a range of specialty pharmacy services, significantly enhancing pharmacy revenues for the parent company. Pharmacy revenues saw a 31.8% year-over-year increase in the first half of 2024. 

Conversely, Cigna Healthcare is strengthened by its sound customer base across the U.S. Healthcare business. This segment anticipates long-term average annual adjusted earnings growth in the band of 7-10%. 

An expanding customer base leads to higher premiums, a critical revenue source for health insurers. As of June 30, 2024, Cigna served 19 million medical customers. The aging U.S. population is likely to drive continuous demand for its Medicare plans in the days ahead. In addition to premium growth, Cigna Healthcare benefits from ongoing product enhancements and new or extended partnerships with prominent healthcare systems.

Cigna strategically acquires companies to bolster its solutions and capabilities, broaden its geographical reach and reinforce its market presence. In alignment with its focus on high-growth platforms, it has divested its non-core health units. A robust cash balance and sufficient cash generation abilities allow the company to invest in business expansion and strategically allocate capital for share buybacks and dividends. Over the next five years, management anticipates cash flows of approximately $60 billion.

Stocks to Consider

Some better-ranked stocks in the Medical space are Universal Health Services, Inc. UHS, The Ensign Group, Inc. ENSG and HCA Healthcare, Inc. HCA. Universal Health currently sports a Zacks Rank #1 (Strong Buy), and Ensign Group and HCA Healthcare carry a Zacks Rank #2 (Buy).

Universal Health's earnings surpassed the Zacks Consensus Estimate in each of the last four quarters, the average surprise being 14.58%. The consensus estimate for UHS' 2024 earnings indicates a rise of 51% from the year-ago number. The consensus mark for revenues indicates growth of 9.8% from the year-ago figure. 

The Zacks Consensus Estimate for UHS' earnings has moved 15% north in the past 30 days. Shares of Universal Health have gained 73.7% in the past year.

Ensign Group's earnings outpaced the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 1.40%. The consensus estimate for ENSG's 2024 earnings indicates a rise of 14.1% from the year-ago number. The consensus mark for revenues implies an improvement of 13.1% from the year-ago figure. 

The Zacks Consensus Estimate for ENSG's earnings has moved 0.7% north in the past 60 days. Shares of Ensign Group have risen 59.9% in the past year.  

HCA Healthcare's earnings beat the Zacks Consensus Estimate in three of the trailing four quarters and missed the mark once, the average surprise being 8.24%. The consensus estimate for HCA's 2024 earnings indicates an improvement of 18.2% from the year-ago figure. The consensus mark for revenues implies growth of 8.9% from the year-ago figure. 

The Zacks Consensus Estimate for HCA's earnings has moved 1.2% north in the past seven days. Shares of HCA Healthcare have rallied 42% in the past year.

To read this article on Zacks.com click here.