Shares of The Cigna Group CI jumped 7.3% yesterday after it clarified in a press release that it's not pursuing a merger with Humana Inc. HUM. Recent speculation suggested a possible merger deal due to a potentially more business-friendly environment following the presidential election.

However, Cigna put these rumors to rest, clarifying that its M&A criteria includes only acquisitions that are strategically aligned, financially attractive and have a high likelihood of closing. The stock price jump indicates investor support for this clear strategic stance.

In contrast, rival Humana’s shares dropped 2% as Cigna’s announcement cooled any optimism surrounding a potential merger. Humana’s business is currently facing challenges from higher-than-expected claims and lower-than-anticipated government payment rate increases. Additionally, the quality rating of Humana’s largest Medicare Advantage plan was recently downgraded by the government, which will likely impact the quality bonuses the company stands to receive.

CI’s Reaffirmed Outlook

With speculation about a merger now settled, Cigna investors can shift their focus to the company’s projected growth for this year rather than speculating about its future direction. CI reaffirmed its 2024 outlook, projecting full-year adjusted EPS to be a minimum of $28.40. This indicates growth of at least 13.2% from the 2023 figure. The company also estimates adjusted EPS growth of at least 10% in 2025, reinforcing confidence in its growth trajectory.

CI’s Buybacks

The company is expected to continue its efforts to enhance shareholder value through share repurchases. So far this year, Cigna has bought back $6 billion worth of stocks, including $1 billion in the current quarter. It intends to maintain the buybacks through the remainder of this quarter and into next year. It plans to use most of the proceeds from the anticipated first-quarter 2025 sale of its Medicare businesses for additional buybacks. It currently has $5.3 billion left under its share repurchase fund.

CI’s YTD Price Performance

Shares of Cigna have gained 14.6% in the year-to-date period compared with the 9.9% rise of the industry it belongs to.

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CI’s Zacks Rank & Key Picks

Cigna currently has a Zacks Rank #3 (Hold).

Some better-ranked and promising stocks in the broader Medical sector are Tenet Healthcare Corporation THC and CareDx, Inc CDNA. While Tenet Healthcare currently sports a Zacks Rank #1 (Strong Buy), CareDx carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Tenet Healthcare’s 2024 bottom line suggests 63.2% year-over-year growth. THC has witnessed four upward estimate revisions over the past 30 days against no movement in the opposite direction. It beat earnings estimates in all the trailing four quarters, with an average surprise of 59.9%.

The Zacks Consensus Estimate for CareDx’s current-year earnings indicates a 145.3% year-over-year improvement. CDNA beat earnings estimates in each of the past four quarters, with an average surprise of 135.2%. The consensus mark for revenues suggests 17.5% growth from the year-ago period.

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