Earnings Preview: Aetna

Jul.30.12 | About: Aetna, Inc. (AET)

Aetna (NYSE:AET) is expected to report Q2 earnings before the market open on Tuesday, July 31 with a conference call scheduled for 8:30 am ET.

Guidance

Analysts are looking for EPS of $1.25 on revenue of $8.8B. The consensus range is $1.18-$1.33 for EPS, and $8.51B-$9B for revenue, according to First Call. After reporting disappointing EPS and better-than-expected revenue in Q1, the company expected full-year EPS to be $5.00. In June, Aetna said it expects Q2 EPS to be lower than Q1 EPS. The company had also reported Q1-end medical members at 17.9 and expected it to reach 18.2 by year end. Aetna expects medical costs to stabilize and does not see pricing trends to decrease as the year goes forward. After the U.S. Supreme Court upheld Obama's health care overhaul and ruled that Medicaid expansion was constitutional, Aetna said the decision will have no change in direction for the company, although the stock price has gone down since the news. In fact, Aetna expects the bill will provide higher premiums in 2014-2015 and a better relationship between providers and payers. Investors will look to hear further updates on the bill and if the company had any further comments on its effects.

Analyst Views

In recommendations, Aetna was downgraded to sell at Goldman and to Hold at Argus, citing difficult earnings growth and disappointing data in surgical trends. Leerink, however, said the company's weakness should provide a buying opportunity for investors.