Five months in, 2018 has not been kind to Cigna Corporation (NYSE:CI) stock. A strong run in which CI stock doubled between the November 2016 election and late January reversed quickly. CI stock now is off some 25% from its all-time highs reached a little over three months ago — and down more than 15% so far this year while the broader S&P 500 Index is up a hair above 1%.

Cigna beat earnings estimates on top and bottom lines last week, but I doubt that will be enough.

The insurer’s acquisition of Express Scripts Holding Co (NASDAQ:ESRX) has been widely panned, as Dana Blankenhorn pointed out in March. CI stock fell sharply after Q4 results on March 1, despite a solid performance, showing some clear investor concern about long-term prospects.

And there’s a lot to be worried about here. Cigna’s own efforts – first a blocked merger with Anthem Inc (NYSE:ANTM) — and now the ESRX deal — show the company isn’t comfortable going it alone. The health care space is being upended. Competitors are bulking up, with CVS Health Corp (NYSE:CVS) moving ahead to acquire Cigna’s larger rival Aetna Inc (NYSE:AET). Walmart Inc (NYSE:WMT) and Amazon.com, Inc. (NASDAQ:AMZN) loom over the space.

Despite the earnings beats, investors are more interested in the status of the ESRX deal and what it means for Cigna going forward. As FierceHealthcare noted last week, Cigna could be on the hook for $2.1 billion if the deal falls through.

I think the company is going to have a tough sell.

Are Cigna Earnings Enough?

Cigna stock has shown a little bit of a rally of late, gaining about 4% in the past month. And it’s possible the earnings report will refocus investors on the opportunity here — and Cigna’s earnings growth.

After all, Cigna pretty much crushed estimates for both revenue and profits in all four quarters last year.

But the question is whether last week’s numbers will be enough. Close to half of the value of the combined Cigna/Express Scripts — which investors already didn’t like — will come from Express Scripts and the company seemed to disappoint investors with its May 2 earnings report.

More broadly, the issue is whether a single earnings report can change investor sentiment at this point. The market is nervous when it comes to Cigna Corporation stock. And considering the two outcomes, it’s not hard to see why.

Cigna Stock On Its Own

Given that Cigna shares tumbled on the news it was acquiring Express Scripts, it would seem logical that CI stock would gain if the deal were to break. But I’m not sure that’s the case any longer.

Again, Cigna itself has made clear that it’s not happy competing in the space on its own. It needs the PBM (pharmacy benefit manager) capabilities offered by Express Scripts because rivals like UnitedHealth Group Inc (NYSE:UNH) have built their own.

Given all the activity in the space, a Cigna riding solo looks like a Cigna left behind. The solid Q1 earnings can mitigate those fears somewhat, but only modestly.

CI Stock With ESRX

Of course, hitching its wagon to Express Scripts may not be the best move, either. As Blankenhorn put it in March, Cigna is “late to the party”. Concerns about pricing transparency have pressured standalone PBMs like Express Scripts, one key reason ESRX still trades at less than 8x EPS.

Cigna forecasts $20-$21 in EPS for the combined company by 2021 — which sets up some upside if investors come around. But that’s a relatively big if. Assuming CI stock holds its current 15x multiple, it would return about 16% a year over the next three years.

But that requires the merger to go to plan — never a guarantee — and investors to see the combined business as more valuable than its parts. (Again, ESRX trades at 7.8x 2019 EPS estimates.) For mid-double-digit upside, that seems a lot to ask.

Here, too, Q1 earnings could be a step in the right direction. But it’s actually ESRX’s report that is more important for CI stock. Investors already have made up their minds on Cigna — and I’m skeptical last week’s release did much to change them.

As of this writing, Vince Martin has no positions in any securities mentioned.