Copyright Benzinga
Cigna Group (NYSE:CI) said it expects margin pressure within the pharmacy benefit services segment over the next two years. During its earnings call, the company added that in Evernorth, it expects operating income to be slightly down in 2026. The specialty and care services business is expected to grow income towards the higher end of its long-term growth target, offset by a decline in pharmacy benefit services. Goldman Sachs on Tuesday reduced EPS estimates and lowered price forecast from $370 to $330, while maintaining its Buy rating. While investors have long applied a significant discount to Cigna’s forward P/E multiple to anticipate future pressure on pharmacy benefit manager (PBM) margins, the market did not expect that “the PBM margin reset” would arrive with the 3Q25 earnings call. Also Read: Analyst Favors Cigna, Alignment Healthcare, Cautious On Peers Analyst Scott Fidel says they were just as surprised as the market by Cigna’s PBM lowered guidance. Goldman Sachs did not anticipate a material decline in 2026 PBM segment earnings on company-sanctioned pricing changes. Cigna expects margin pressure in 2026 and 2027 as it rolls out its new rebate-free PBM pricing model and renews long-term contracts at lower margins with its three largest PBM clients — Prime Therapeutics, the Department of Defense, and Centene Inc. (NYSE:CNC). Together, these clients generate about $90 billion in annual revenue, representing roughly 40% of Evernorth's 2025E revenue and 30% of Cigna's total adjusted revenue forecast. While Cigna maintained its long-term Evernorth margin target of 3.5%–4.5%, Goldman Sachs expects results to remain toward the lower end of that range, constrained by the lower-margin structure of these large contracts through at least the decade's end. Cigna views the trade-off as strategic—accepting slimmer margins to preserve roughly $90 billion in pharmacy volume and pricing leverage as it transitions other clients to its new PBM pricing model. JP Morgan maintains a Cigna Overweight rating, lowering the price forecast from $428 to $375. Barclays maintains Cigna with an Overweight and lowers the price target from $383 to $300. Price Action: CI stock is up 0.40% at $259.65 at the last check on Tuesday. Read Next: Tesla’s Head Of Business Development Says EV Giant Is Building Full Autonomous Stack: ‘Waymo Needs Vehicles…’ Photo: Shutterstock
