Shares of The Cigna Group (CI, Financial) experienced a notable decline today, falling by 7.46%. This downturn follows the announcement of their latest earnings report, which fell short of analyst expectations, resulting in investor apprehension.
Although Cigna (CI, Financial) reported fourth-quarter revenue of $65.65 billion, surpassing Wall Street's estimate of $63.44 billion, the company's earnings per share (EPS) were significantly below expectations, at $6.64 compared to the anticipated $7.82. The rising medical costs have been a substantial contributor to this EPS miss, highlighting a medical cost ratio of 87.9%, compared to the expected 84.7%. This ratio is a crucial metric for health insurers, indicating a higher expense level relative to received premiums.
Looking forward, Cigna's CEO, David Cordani, outlined plans for "corrective actions" to manage current pressures and bolster long-term growth. The company estimates a timeline of two years to address the margin compression caused by these increasing costs, with an EPS forecast of $29.50 for 2025, which remains below Wall Street's expectation of $31.50.
Despite the recent challenges, Cigna continues to focus on shareholder returns by approving an 8% increase in the quarterly dividend and authorizing an additional $6 billion for share repurchases. These moves signal management's confidence in the company's underlying business strength and its commitment to returning value to shareholders.
As for the stock's valuation, Cigna (CI, Financial) currently trades at a price of USD 280.69 with a price-to-earnings (P/E) ratio of 26.48. The company's GF Value is estimated at USD 421.91, indicating a significantly undervalued status. For more on the GF Value, you can visit the GF Value. The firm has demonstrated a robust dividend growth compounded over the last five years at 239.9%, while the stock's price-to-book (P/B) ratio stands at 1.87, close to a one-year low.
Analysts and investors will likely watch Cigna's efforts to control medical costs and its commitment to improving margins. Despite short-term headwinds, the stock's valuation profile presents a potentially attractive opportunity for long-term investors.
