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The Zacks Analyst Blog Highlights: Aetna, UnitedHealth Group, Citigroup, Bank of America and KeyCorp

The Zacks Analyst Blog Highlights: Aetna, UnitedHealth Group, Citigroup, Bank
                            of America and KeyCorp

PR Newswire

CHICAGO, Dec. 14, 2012

CHICAGO, Dec. 14, 2012 /PRNewswire/ --Zacks.com announces the list of stocks
featured in the Analyst Blog. Every day the Zacks Equity Research analysts
discuss the latest news and events impacting stocks and the financial markets.
Stocks recently featured in the blog include Aetna Inc. (NYSE:AET),
UnitedHealth Group Inc. (NYSE:UNH), Citigroup Inc. (NYSE:C), Bank of America
Corp. (NYSE:BAC) and KeyCorp (NYSE:KEY).

(Logo: http://photos.prnewswire.com/prnh/20101027/ZIRLOGO)

Get the most recent insight from Zacks Equity Research with the free Profit
from the Pros newsletter: http://at.zacks.com/?id=5513

Here are highlights from Thursday's Analyst Blog:

Cautious Guidance from Aetna

Health insurer Aetna Inc. (NYSE:AET) expects its 2013 earnings per share to be
at least $5.40, below the Zacks Consensus Estimate of $5.52 per share. The
conservative guidance from the company comes on the back of increasing medical
costs and weak enrollment.

Based on the fourth quarter 2012 performance till date, including actual
results of October and November 2012, Aetna reiterated its earlier full-year
2012 EPS expectation of $5.10. The Zacks Consensus Estimate for 2012 is
currently pegged at $5.15, modestly higher than the company's guidance.

Revenues for the full-year 2012 are projected to be approximately $35.5
billion, and full-year 2013 revenues are projected to grow approximately 9%
compared with 2012.

The guidance excludes the positive accretion anticipated from the Coventry
acquisition, which is likely to close next year.

Aetna has been benefiting from low medical utilization for the last couple of
years. However, it expects that the trend will reverse to normal levels
resulting in higher medical costs.

Aetna, the third-largest U.S. health insurer by membership, expects 2012
year-end membership of 18.2 million, with enrollment remaining unchanged
through the first quarter of 2013. By the end of 2013, membership is expected
to reach about 18.4 million.

The company also estimates 2012 share buybacks to total $1.4 billion.

Health insurers are becoming very cautious as the year 2013 is expected to
present a number of headwinds – regulatory as well as economic. However, in
our point of view, the company is being overly precautious in providing its
earnings guidance. It is following the trend of peer

UnitedHealth Group Inc.

(NYSE:

UNH

), which also provided a narrow outlook last month. It expects 2013 earnings
estimates in the range of $5.25–$5.50 per share, on revenue of $123–$124
billion.

Despite the moderate guidance, we believe that the company will surprise
investors on the back of a number of tailwinds – positive accretion from the
Coventry acquisition; growing Medicare and Medicaid; share buyback; earlier
deals made in 2011 adding incremental earnings, which will overshadow
headwinds such as a weak commercial membership growth, low investment income,
higher expenses due to investments in the Accountable Care Solutions and
exchanges.

Till we get more shades on Aetna's 2013 earnings we would continue maintaining
our long-term 'Neutral' recommendation on the shares. The stock currently
retains a Zacks #3 Rank, which translates into a short-term Hold rating.

Citi in Legal Hassle Once Again

Litigation issues arising from mortgage securities are far from over for
Citigroup Inc. (NYSE:C). The company is now entangled in a lawsuit filed by
Swisscanto Asset Management AG for presenting distorted information regarding
the company's financial health between 2006 and 2009, according to a Bloomberg
report. However, the damage amount has not been specified by Swisscanto.

The lawsuit, which was filed in the Manhattan federal court, particularly
charged Citi and its former officers and directors of repeatedly providing
misleading information to investors related to losses arising from the
company's mortgage securities. As a result, the complaints ended up buying
Citi securities at an exaggerated price.

Notably, related to the same claims, a class-action or group lawsuit is
already pending in the Manhattan federal court. Swisscanto, however, requested
to be excepted from the class. On the other hand, Citi planned to strongly
oppose this lawsuit.

Citi, being hit hard by the impact of the financial crisis, had to seek refuge
in government bailouts to stay afloat. Its market value significantly
plummeted since the crisis and the company is still battling the aftermath of
the crisis. Citi's conduct related to mortgage securities has been questioned
several times and the Swisscanto lawsuit has added to its woes.

However, owing to the litigation overhangs, Citi needs to engage its resources
to resolve them. This consequently increases legal costs, compelling the
company to opt for settlements. Yet, this in turn exhausts the company's
financials, which could have been steered towards its growth initiatives, had
it not been subject to such litigations.

Citi, otherwise, boasts an impressive global footprint and attractive core
business. The company has restructured its business and overhauled its risk
management. It is reducing its risky exposures by trimming the problem assets,
which in turn frees up capital to be invested in its core business.

Moreover, to rightsize its business and increase efficiency across the
organization, the company has recently announced significant layoffs. While
such efforts are encouraging, the low interest rate environment, regulatory
headwinds and litigation risks remain our concerns.

Citi currently retains its Zacks #3 Rank, which translates into a short-term
Hold rating. Considering its fundamentals, we have a long-term Neutral
recommendation on the stock. Among its peers,

Bank of America Corp.

(NYSE:

BAC

) and

KeyCorp

(NYSE:

KEY

) also have a Zacks #3 Rank.

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