Why Cigna Stock Is Plummeting Today

Shares of Cigna (NYSE: CI) were dropping Thursday. The stock was down 8.4% as of 1:20 p.m. ET but had lost as much as 11.3% earlier in the day. The leg down comes as the S&P 500 gained 0.2% and the Nasdaq Composite lost 0.2%.

The insurer reported earnings before the market open, missing certain estimates and offering guidance that disappointed investors.

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The numbers didn't look great

While Cigna's Q4 revenue of $65.65 billion beat Wall Street's estimate of $63.44, rising medical costs led to a much more significant earnings-per-share (EPS) miss. The company delivered $6.64 per share, when Wall Street expected $7.82.

Health insurance companies use a key metric called the medical cost ratio to track the relationship between premiums and expenses paid -- lower is better. Cigna reported a ratio of 87.9%, higher than the expected 84.7%.

An eye on the future

Cigna CEO David Cordani said in the earnings call Cigna is taking "corrective actions to address these near-term pressures" and "steps to further advance our long-term growth strategy" in the face of these rising costs. During the call, the team told investors that it would take two years to recover the margins compacted by higher-than-expected costs. In light of this, the company forecasts EPS for 2025 to hit $29.50 while Wall Street has expected guidance of $31.50 per share.

In good news for shareholders, the board of directors increased Cigna's quarterly dividend by 8% and authorized a $6 billion increase in share repurchasing.

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Johnny Rice has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.