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Aetna Hits 52-Week High on Strong Q3, Star Rating Action


On Nov 22, 2016, the stock of Aetna Inc. AET climbed to a 52-week high of $128.73. The upside in the stock is believed to have been driven by a profitable third quarter reported last month and favorable medicare star rating action.

Over the past 52-weeks, the stock gained 23% compared with a rise of just 5.5% in the S&P 500 index over the same period.

Investors favorably viewed the company’s third-quarter results, which witnessed broad-based revenue and earnings growth.

The quality of earnings was strong as evident by revenue growth of 5% year over year to $15.7 billion. The company’s adjusted earnings per share grew 9% to $2.07 per share and surpassed the Zacks Consensus Estimate of $2.02.

Investors also appreciated management’s cost reducing drive which lowered the adjusted operating expense ratio to 17.6% from 18.6% in the year-ago quarter.

It is noteworthy that the company’s Government business, which includes Medicare and Medicaid, is performing strongly. The company has been witnessing an increase in top line and enrollment in this line of business over the past many quarters and government premiums now represent nearly 50% its total health care premiums. The government business presents a strong growth potential given the ever-increasing demand for its products from the growing baby boomers population.

The rise in share price must also have been favored by a positive tone on the third-quarter earnings conference call regarding the expectation of continued strong performance in the fourth quarter and into 2017. The company continues to expect strong operating performance in its core businesses and raised its operating EPS projection to $7.95 to $8.05 per share.

AETNA INC-NEW Price and Consensus

AETNA INC-NEW Price and Consensus | AETNA INC-NEW Quote

The stock must also have garnered attention from its receipt of high ratings by the Centers for Medicare and Medicaid Services (CMS) in the annual Star Ratings, released on Oct 12, relating to its Medicare Advantage Prescription Drug (MAPD) plans. For 2017, Aetna’s MAPD plans earned an overall weighted average rating of 4.0 out of 5.0 stars. The company’s 2017 star ratings for its MAPD plans reflect its commitment to improve member health and experience.

Aetna carries a Zacks Rank #4 (Sell).

Another player Humana Inc. HUM and UnitedHealth Group Inc. UNH also touched a 52-week high recently following strong third-quarter earnings. Humana rose on hopes that the new governance under the presidency of Donald Trump will help its merger with Aetna. The stock of UnitedHealth was helped by a raised earnings guidance for 2016. Both Humana and UnitedHealth carry a Zacks Rank # 2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Another player from the same industry Tenet Healthcare Corporation THC, however, fell to a 52-week low earlier during the month following its third-quarter earnings release which revealed poor performance and weak guidance. Tenet Healthcare carries a Zacks Rank #3 (Hold).

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