On Jan 2, Zacks Investment Research upgraded WellPoint Inc. (WLP) to a Zacks Rank #3 (Hold) from a Zacks Rank #4 (Sell).
Why the Upgrade?
WellPoint has witnessed rising earnings estimate on the back of solid results delivered in the third quarter of 2013. Moreover, WellPoint delivered positive earnings surprises in all its last four quarters with an average beat of 18.1%.
In third-quarter 2013, Wellpoint generated operating earnings of $2.10 per share, beating the Zacks Consensus Estimate by 14.7%. This was a penny higher than the year-ago earnings of $2.09 per share. Also, operating revenues of $17.7 billion came in line with the Zacks Consensus Estimate but improved 17.2% from the prior-year quarter.
The improvement came on the back of a lower-than-expected medical cost experience and growth in membership and revenues. Further, both the Commercial and Government segments showed improvements to contribute further to the progressive performance of WellPoint.
Improvement was also induced by the acquisition of Amerigroup but was partially offset by lower Medicare revenues due to lower membership. Wellpoint also garners investors’ confidence by enhancing shareholders’ value in terms of share repurchase activities as well as quarterly dividend payments.
However, WellPoint expects its full year 2013 adjusted earnings to stand at around $8.40 a share, which lies well below our expectations of $8.51 a share. Furthermore, the guidance for operating revenues was reaffirmed at $70–$72 billion. Year-end medical enrollment guidance was raised to 35.6 million from 35.3–35.5 million.
The Zacks Consensus Estimate for 2013 increased from $8.50 per share to $8.51 a share over the last 60 days. For 2014, the estimate has gone up by 0.5% to $8.35 per share over the same time period.
Other Stocks to consider
Investors interested in the healthcare sector may consider stocks like Gentiva Health Services Inc. (GTIV) and Addus HomeCare Corporation (ADUS), which sport a Zacks Rank #1 (Strong Buy). Another player, Acadia Healthcare Company Inc. (ACHC) carries a Zacks Rank #2 (Buy).
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