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Cigna shares rise as RBC upgrades rating to outperform

Published 05/02/2024, 17:10
Updated 05/02/2024, 17:10
© Reuters.

On Monday, RBC Capital Markets raised its rating on Cigna Corporation (NYSE:CI) from Sector Perform to Outperform, also increasing the price target to $354 from the previous $327. The upgrade reflects a positive outlook on the company's near-term earnings per share (EPS) growth, which is expected to be bolstered by share buybacks.

The firm noted a stronger operating environment for Cigna in the current year, citing strategic pricing actions in the exchange book and conservative assumptions around stop-loss as key factors. These elements contribute to the company's solid foundation, which is anticipated to support its financial performance.

RBC Capital Markets highlighted the significant cash flow that Cigna has earmarked for share buybacks, suggesting that this will likely diminish the intensity of discussions surrounding Humana (NYSE:HUM) for the time being. The analyst's commentary points to a more stable period for Cigna, with less focus on potential market controversies.

The upgraded price target is based on the expectation of a recovery in Cigna's multiple to its long-term historical average of approximately 12.5 times, from around 11.4 times at present. The firm's analysis indicates confidence in Cigna's ability to achieve this valuation improvement.

Overall, RBC Capital Markets' outlook for Cigna is optimistic, with the belief that the company has a clear path ahead to enhance its market valuation and continue its growth trajectory.

InvestingPro Insights

In light of RBC Capital Markets' upgrade of Cigna Corporation (NYSE:CI), recent data from InvestingPro further supports the positive sentiment surrounding the company. Cigna's management has been actively engaged in share buybacks, an initiative that often reflects confidence in the company's future prospects and a commitment to delivering shareholder value. This aligns with RBC's recognition of Cigna's use of significant cash flow for share repurchases.

InvestingPro Tips also highlight that Cigna has not only raised its dividend for 3 consecutive years but has also maintained dividend payments for an impressive 43 consecutive years. This track record of consistent dividend growth underpins the company's financial stability and reliability as an income-generating investment.

From a valuation perspective, Cigna is trading at a Price/Earnings (P/E) ratio of 18.1, which has adjusted to 17.14 over the last twelve months as of Q3 2023. This suggests a reasonable valuation, especially when considering the company's strong free cash flow yield. Moreover, with a Price/Book (P/B) ratio of 2.08, Cigna's stock appears to be priced favorably in relation to its book value.

For readers interested in a deeper dive into Cigna's financials and potential investment opportunities, InvestingPro offers additional tips. To enhance your investment research, consider subscribing to InvestingPro+, now available at a special New Year sale with a discount of up to 50%. Use coupon code SFY24 to get an additional 10% off a 2-year subscription, or SFY241 to get an additional 10% off a 1-year subscription. Discover how many more InvestingPro Tips are available to guide your investment decisions.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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