We are upgrading our recommendation on the shares of CIGNA Corp. (CI) to Outperform from Neutral on the back of improving enrollment expectations, expanding international business. Its first quarter core earning was fairly ahead of Zacks Consensus Estimates well as year ago earnings.
Better-than-expected results stemmed from strong earnings from across the board. EPS was also higher due to lower number of shares in the quarter compared with last year’s quarter. We believe the recent acquisition of Vanberda International will improve the company’s already thriving international operations, which is a key to future growth. Moreover, CIGNA has lower exposure to reform risks than other insurers and thus have an edge with respect to health care reform.
A strong balance sheet and adequate liquidity will further lead to continued share buybacks contributing to the bottom line. Also, membership enrollment has shown an increase. Our six-month target price of $58.00 equates to about 11.5x our earnings estimate for 2011.