Shares of Cigna Jump to a 13-month High After a Beat on Earnings and a Dividend Hike

Cigna Group witnessed a significant surge in its shares, reaching a 13-month high on Friday, following the announcement of a fourth-quarter earnings beat and a 14% increase in its dividend. The health care services company experienced a premarket trading rally of 6.2%, positioning it to open at its highest price during regular-session hours since January 3, 2023.

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The reported net income for the quarter was $2 billion, translating to $3.49 per share, compared to $1.53 billion, or $3.91 per share, in the corresponding period the previous year. This increase was achieved despite a 3.6% decline in shares outstanding. Excluding nonrecurring items, the adjusted earnings per share rose to $6.79 from $5.02, surpassing the FactSet consensus of $6.54.

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Revenue demonstrated robust growth, expanding by 11.7% to $51.11 billion, a figure well above the FactSet consensus of $48.9 billion.

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Noteworthy customer increases were observed, with pharmacy customers rising by 5% to 98.6 million, and medical customers experiencing a 10% uptick to 19.8 million. However, customer relationships saw a 7.7% decline to 164.4 million, attributed to the nonrenewal of a supplemental behavioral coverage contract with New York Life.

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In a separate move, Cigna decided to elevate its quarterly dividend to $1.40 per share from $1.23 per share. Calculated based on Thursday's closing prices, the new annual dividend rate implies a dividend yield of 1.82%, surpassing the implied yields for the Health Care Select Sector SPDR ETF (XLV) at 1.53% and the S&P 500 at 1.44%.

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Looking ahead, Cigna anticipates adjusted earnings per share of "at least" $28.25, in contrast to the FactSet consensus of $28.29.

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Cigna's stock experienced a notable 13.9% surge in December, marking its best monthly performance in 14 months. This surge was fueled by reports suggesting that the company had opted out of discussions regarding a potential merger with health insurer Humana Inc. Despite this positive development, the stock has seen a 3.6% decrease over the past three months through Thursday. In the same period, the health care ETF witnessed a robust 12.2% climb, while the S&P 500 gained 13.6%.

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