Why Aetna Shares Slumped

Don't let it get away!

Keep track of the stocks that matter to you.

Help yourself with the Fool's FREE and easy new watchlist service today.

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of diversified health-care benefits company Aetna (NYSE: AET  ) dipped as much as 12% earlier today after the company reported disappointing first-quarter results.

So what: For the quarter, Aetna reported a drop in quarterly net income to $1.34 (excluding one-time items) which is $0.06 worse than Wall Street had expected. Revenue, however, did rise 6% to $8.92 billion as enrollments ticked higher by 0.6%. The company blamed rising medical claim costs and higher administrative expenses as the primary culprit for the earnings miss. Specifically, premium revenue spent on medical costs increased to 81.5% from 79.2% in the previous year.

Now what: What's particularly disturbing about Aetna's miss is that larger peers UnitedHealth Group (NYSE: UNH  ) and WellPoint (NYSE: WLP  ) both surpassed Wall Street's forecasts and upped their full-year guidance. Being that this seems isolated just to Aetna isn't good news for Aetna shareholders. Although it kept its full-year guidance unchanged and does expect overall enrollment to grow from 17.92 million to 18.2 million by year's end, Aetna's inability to curb rising medical costs is a worrisome trend that I'd just as soon avoid.

Craving more input? Start by adding Aetna to your free and personalized watchlist so you can keep up on the latest news with the company.

Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.

The Motley Fool owns shares of WellPoint. Motley Fool newsletter services have recommended buying shares of UnitedHealth Group and WellPoint. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Read/Post Comments (0) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 1872370, ~/Articles/ArticleHandler.aspx, 10/23/2016 5:40:09 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 1 day ago Sponsored by:
DOW 18,145.71 -16.64 -0.09%
S&P 500 2,141.16 -0.18 -0.01%
NASD 5,257.40 15.57 0.30%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

10/21/2016 4:02 PM
AET $111.25 Up +0.32 +0.29%
Aetna CAPS Rating: ***
ANTM $123.50 Down -0.53 -0.43%
Anthem CAPS Rating: *****
UNH $145.37 Up +0.30 +0.21%
UnitedHealth Group CAPS Rating: ****