Will Analysts Bail on CBS and CIGNA After Earnings?

CBS Corporation (NYSE:CBS) and CIGNA Corporation (NYSE:CI) could get hit with bearish analyst attention after earnings

by Josh Selway

Published on Jul 29, 2016 at 11:33 AM
Updated on Jul 29, 2016 at 11:33 AM

We've been highlighting earnings winners and losers all week. This time around, we're going to look at two stocks moving lower after earnings that could be vulnerable to a round of bearish analyst attention: media giant CBS Corporation (NYSE:CBS) and health insurer CIGNA Corporation (NYSE:CI). Let's take a closer look at what's happening with CBS and CI, and why more trouble could be ahead for the stocks. 

The company reported much better-than-expected earnings, but shares of CBS are down 3.7% today at $52.20. While the stock is seeing familiar support from the $52 level and 140-day moving average, a sustained move lower could spark a round of bearish analyst attention. 

For example, 17 of 21 brokerage firms that cover CBS recommend buying it -- even though the stock has been trending lower since early 2014. Moreover, the stock's average 12-month price target of $62.65 represents not only annual-high territory, but a 20% premium to current levels. Reaffirming this sense of undeserved optimism, Cowen this morning raised its price target to $62. If the shares breach the aforementioned layers of support, downgrades and/or price-target reductions could certainly weigh on CBS going forward. 

Plus, any interested options trader will be pleased to note that CBS Corporation's Schaeffer's Volatility Index (SVI) of 27% ranks in the low 13th annual percentile. This means the options market is pricing in unusually low volatility expectations at the moment -- good news for anyone looking to buy CBS' short-term options. 

As for CI, not only is the company dealing with M&A drama, but it just posted lackluster quarterly earnings results, and reduced its full-year outlook. The stock was last seen 4.7% lower at $129.64 -- extending a turbulent 12 months that have seen the shares grind out lower lows. This difficult stretch follows a roughly three-year run that saw CI stock climb from around $40 to all-time highs near $170 back in mid-2015. 

But while CI's performance on the charts has changed drastically, analysts' outlooks have remained firmly upbeat. Seven of 13 brokerage firms tracking the stock say it's a "strong buy," and just one recommends selling CI. Even more notably, the shares have a consensus 12-month price target of $163.07 -- a 26% premium to where the stock is trading now. It appears a round of bearish analyst attention is long overdue for CIGNA. 

While not as attractive as CBS', CIGNA Corporation's (NYSE:CI) short-term options are fairly priced, from a volatility perspective. Specifically, the stock's SVI of 25% sits below 63% of the past year's readings. 

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