Aetna's stock climbed to a new all-time high Thursday as an analyst upgraded the health insurer's rating, saying the Coventry Health Care acquisition provides a bit of a cushion as uncertainty surrounds health care reform.
Aetna Inc. completed its $5.7 billion acquisition of Coventry Health Care Inc. in May. Ralph Giacobbe of Credit Suisse said in a client note that Coventry continues to do well and should add more to Aetna's earnings this year.
The analyst also believes that any downside risk related to health care reform will likely be limited.
"Given the slow rollout of the exchange and Aetna's limited exposure to Medicaid expansion states, our sensitivity analysis suggests manageable risk," Giacobbe wrote.
The analyst also doesn't expect the company's costs to be a major concern this year, even though Aetna is predicting they will climb. Giacobbe said that while there may be a rise in utilization related to health care reform, he anticipates underlying costs will stay muted.
Giacobbe raised Aetna to "Outperform" from "Neutral" and increased its price target to $83 from $69. He also named the Hartford, Conn., company as his new top pick in Managed Care and said that the Credit Suisse Investment Policy Committee is adding Aetna to the U.S. Focus List.
The company's shares gained $1.99, or 2.9 percent, to $71.13 in afternoon trading. Earlier in the session the stock struck a new all-time high of $71.34.