The Cigna Group CI reported third-quarter 2024 adjusted earnings per share (EPS) of $7.51, which beat the Zacks Consensus Estimate by 4%. The bottom line improved 10.9% year over year.
Adjusted revenues were $63.7 billion, which climbed 29.8% year over year on the back of large client wins in the Evernorth Health Services segment. The top line outpaced the consensus mark by 6.5%.
The strong quarterly results were driven by growth in the Specialty and Care Services businesses within the Evernorth Health Services segment and new client wins. A decline in its medical customer base and an escalation in total benefits and expenses partially offset the positives.
CI’s medical customer base was 19 million as of Sept. 30, 2024, which slipped 2.9% year over year and lagged the Zacks Consensus Estimate of 19.2 million. The metric was hurt by a decline in Individual and Family Plans customers.
Total benefits and expenses of $61.1 billion escalated 31% year over year, higher than our estimate of $56.7 billion. The year-over-year increase was due to a significant rise in pharmacy and other service costs. Adjusted SG&A expense ratio improved 180 basis points (bps) year over year to 5.5% as a result of the business mix shift and continued operational efficiencies.
Adjusted income from operations grew 5% year over year to $2.1 billion on the back of solid contributions from Evernorth Health Services, partially offset by reduced net investment income.
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Cigna Group Price, Consensus and EPS Surprise
Cigna Group Price, Consensus and EPS Surprise
Cigna Group price-consensus-eps-surprise-chart | Cigna Group Quote
Segmental Update
Evernorth Health Services: The unit recorded adjusted revenues of $52.6 billion, which surged 36% year over year. The metric outpaced our estimate of $47.5 billion. The top line benefited from organic growth in Specialty and Care Services businesses and new client wins.
Adjusted operating income, on a pre-tax basis, advanced 9% year over year to $1.88 billion, beating the consensus mark of $1.86 billion. The metric gained from consistent affordability improvements. However, the adjusted pre-tax margin of 3.6% deteriorated 80 bps year over year.
Cigna Healthcare: Adjusted revenues were $13.2 billion, which grew 3% year over year as a result of premium rate hikes, partially offset by lower Individual and Family Plans customers. Yet, the metric lagged our estimate of $14.7 billion.
The unit’s pre-tax adjusted operating income decreased 4% year over year to $1.17 billion, which lagged the consensus mark of $1.21 billion and our estimate of $1.24 billion. The metric was impacted due to reduced net investment income and a higher MCR, partially offset by continued operational efficiencies.
MCR deteriorated 230 bps year over year to 82.8% at the third-quarter end. The metric matched our estimate of 82.8%.
Financial Position (As of Sept. 30, 2024)
Cigna exited the third quarter with cash and cash equivalents of $5.9 billion, which fell 24.7% from the 2023-end level. Total assets of $157.6 billion increased 3.2% from the 2023-end figure.
Long-term debt amounted to $30.2 billion, which grew 7.4% from the figure as of Dec. 31, 2023. Short-term debt totaled $2.6 billion.
Total shareholders’ equity of $42.1 billion declined 8.9% from the 2023-end level.
CI generated operating cash flows of $5.2 billion in the first nine months of 2024, which dropped 50.2% from the prior-year comparable period.
Share Repurchase Update
From Jan. 1, 2024, till Sept. 30, 2024, Cigna bought back 14.7 million shares for around $5 billion.
2024 & Long-Term Outlook Reaffirmed
Adjusted EPS is estimated to be a minimum of $28.40, which indicates growth of at least 13.2% from the 2023 figure.
MCR continues to be projected within the band of 81.7-82.5%.
Adjusted operating income, on a pretax basis, for the Evernorth Health Services segment is still anticipated to be a minimum of $7 billion. Meanwhile, the metric for the Cigna Healthcare unit is still forecasted to be a minimum of $4.775 billion.
Cigna expects to achieve average annual adjusted EPS growth of 10-14% in the long term.
Over the next five years, the company is expected to generate operating cash flows of roughly $60 billion.
Previous 2024 Outlook
Adjusted revenues were earlier forecasted at a minimum of $235 billion, which indicates an improvement of at least 20.3% from the 2023 reported figure.
Adjusted operating income was anticipated to be a minimum of $8.065 billion.
CI expected total medical customers to be roughly 19.3 million.
The adjusted SG&A expense ratio was estimated at around 6.1%.
Operating cash flow was forecasted at a minimum of $11 billion.
Earlier, capital expenditures were expected to be around $1.5 billion.
Zacks Rank
Cigna currently carries a Zacks Rank #4 (Sell). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Other Medical Sector Releases
Of the Medical sector players that have reported third-quarter 2024 results so far, the bottom-line results of UnitedHealth Group Incorporated UNH, Molina Healthcare, Inc. MOH and Intuitive Surgical, Inc. ISRG beat the Zacks Consensus Estimate.
UnitedHealth Group reported third-quarter adjusted EPS of $7.15, which surpassed the Zacks Consensus Estimate by 1.9%. The bottom line advanced 9% year over year. Revenues rose 9.1% year over year to $100.8 billion. The top line beat the consensus mark by 1.3%. Its medical care ratio was 85.2%, which deteriorated 290 bps year over year. UNH’s operating earnings grew 2.4% year over year to $8.7 billion. However, the net margin deteriorated 30 bps year over year to 6%.
Revenues from the health benefits business of UnitedHealth, UnitedHealthcare, advanced 7.2% year over year to $74.9 billion. Earnings from operations amounted to $4.2 billion, down 8.7% year over year. Revenues in the Optum business line were $63.9 billion, which rose 12.7% year over year. Optum’s earnings from operations climbed 15.4% year over year to $4.5 billion. The UnitedHealthcare business catered to 50.7 million people as of Sept. 30, 2024, which fell 4% year over year.
Molina Healthcare’s third-quarter adjusted EPS of $6.01 beat the Zacks Consensus Estimate of $5.96. The bottom line grew 19% from the year-ago period. Total revenues amounted to $10.3 billion, which improved 20.9% year over year. The top line outpaced the consensus mark by 3.8%. Premium revenues of $9.7 billion increased 18% year over year.
As of Sept. 30, 2024, total membership improved 8% year over year to around 5.6 million. Investment income rose 5.4% year over year to $118 million and beat the consensus mark of $117.1 million. The consolidated medical care, or MCR, was 89.2%. The metric rose from 88.7% a year ago. Molina Healthcare’s adjusted net income increased 18% year over year to $347 million.
Intuitive Surgical reported third-quarter adjusted EPS of $1.84, which beat the Zacks Consensus Estimate of $1.65 by 11.5%. The bottom line improved 26% year over year. The company reported revenues of $2.04 billion, up 17% from the prior-year quarter, on a reported, as well as a constant currency basis. The top line also beat the Zacks Consensus Estimate by 1.2%. Revenues from the Instruments & Accessories segment totaled $1.26 billion, indicating a year-over-year improvement of 18%.
The Systems segment’s revenues totaled $445 million, up 17.4% year over year. Intuitive Surgical shipped 341 da Vinci Surgical Systems compared with 379 in the prior-year quarter. Revenues from the Services segment amounted to $328.9 million, up 3.7% from the year-ago quarter’s level. Adjusted gross profit was $1.41 billion, up 17.3% year over year. Adjusted operating income totaled $754.9 million, up 21% year over year.
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