A Collins Stewart analyst upgraded shares of Aetna Inc. Monday on lower expectations for health care reform this year, and due to the Hartford health insurer’s earnings guidance.
Collins Stewart analyst Brian Wright said, in a note to clients, Aetna has strengthened its balance sheet compared to the first half of last year and is showing evidence of gross margin stabilization for 2010. He raised his rating on the shares to “hold” from “sell.”
Last week, Aetna said its fourth-quarter profit fell 15 percent to $165.9 million, or 38 cents per share, as it continued to struggle with rising medical costs. Revenue climbed 13 percent to $8.76 billion.
For 2010, Aetna forecast an operating profit of $2.55 to $2.65 per share.
That guidance assumes 8 cents in commercial risk gross margin improvement, Wright said in his note.
“Given further EPS risk is more limited from this more reasonable guidance range and the significantly reduced prospects for health care reform in 2010, we are raising our rating from Sell to Hold,” the analyst wrote.
Investors have worried for months about the impact of taxes and increased regulation a health care reform push might have on managed care companies. But the Congressional push for an overhaul stalled last month after a Republican candidate won a special election for a Massachusetts Senate seat. (AP)
