Bear Stearns downgraded Aetna (AET) to peer perform from outperform, noting the company's quarterly results.
Analyst John Rex says 64 cents second quarter operating earnings per share (EPS) came out a penny above his estimate. He believes today's sensitivity is primarily based around the magnitude of commercial medical cost ratio deterioration, which at 200 basis points far outstrips expectations. He says the company raised 2006 earnings per share (EPS) guidance to $2.77-$2.79, and it appears this is based entirely on share repurchase. He says the 15% drop in shares this year (as of yesterday's close) already reflects some constrained visibility, and with two consecutive quarters of missed expectations, he believes it will take some time to restore investor confidence.