Cigna Has Limited Visibility, No Bullish Catalysts, BofA Says In Double Downgrade

Cigna Corp CI shares were losing ground Friday after the stock was hit by a Wall Street double downgrade.

The Cigna Analyst: Bank of America analyst Kevin Fischbeck downgraded Cigna from Buy to Underperform and cut the price target from $240 to $225.

Related Link: Why Biden's Action Plan Is Bullish For COVID-19 Testing Stocks

The Cigna Takeaways: In the downgrade note, Fischbeck said Cigna has limited financial visibility, no meaningful valuation upside and no clear near-term bullish catalysts ahead.

“CI has now integrated ESRX successfully, de-levered the business and sold off underperforming units, but the growth outlook from here is less clear, in our view,” the analyst said. 

Cigna’s business mix has the lowest end market growth rate of all the managed care organizations Bank of America covers, he said.

Cigna already cut its 2022 EPS guidance, but Fischbeck said consensus Wall Street estimates still seem too high.

At first glance, Cigna’s 10.1 forward earnings ratio make the stock seem like an attractive value play, but the analyst said Cigna is actually trading in-line with its historical earnings multiple since it closed its Express Scripts deal.

Of the six large, profitable MCOs Fischbeck covers, he said Cigna’s second-quarter medical loss ratio results missed estimates by the widest margin.

Looking ahead, he said Cigna is at risk of another MLR risk in the third quarter as well.

Fischbeck also cut his 2021/2022/2023 EPS forecast from $20.20/$22.45/$25 to $20.05/$22.30/$24.85.

CI Price Action: Cigna shares were down 3.83% at $205.76 Friday afternoon. 

Benzinga’s Take: Cigna isn’t the only health care stock that has a cloudy near-term financial outlook.

The COVID-19 pandemic has created plenty of disruption within the entire health care industry, and it’s still not clear at this point when or even if the industry will eventually return to how it was in the pre-pandemic days.