Shares of WellPoint Inc. (WLP) rose 0.6% to $91.35 on Jan 14, after the company raised its earnings per share guidance for full-year 2013. The market reaction apparently suggest that the projection was within market expectations.
Accordingly, WellPoint now expects operating net income to be $8.52 per share, higher than the prior estimate of $8.40 a share. Operating earnings per share excludes net realized gains of 58 cents and tax benefit of 21 cents, more than offset by impairment losses on investments of 21 cents, loss of extinguishment of debt of 31 cents, acquisition-related costs of 5 cents and impairment charges related to 1-800 Contacts of 54 cents.
However, including these charges, reported net income per share is now projected to be at $8.20, lower than at least $8.45 forecasted in Oct 2013. Nonetheless, WellPoint continues to anticipate medical enrollment slightly over 35.6 million members, operating revenue within $70–72 billion, operating cash flow of about $3.0 billion and SG&A expense ratio within 14–14.5%, among others.
Estimate Revisions
Meanwhile, the Zacks Consensus Estimate for 2013 is pegged at $8.53 per share, a cent higher than WellPoint’s raised guidance. The Zacks estimate rose 2 cents in the last 7 days, following the announcement of divestitures of WellPoint’s online contact lens retail subsidiary 1-800 Contacts to Thomas H. Lee Partners and another eye glasses business – glasses.com to one of the premium eyewear companies, Luxottica Group. The deals await regulatory approval and is scheduled to close in the first quarter of 2014.
While WellPoint foresees charges of 52–57 cents per share related to the divestitures, these will likely help the company centralize its operations, thereby focusing on core operations.
Furthermore, as WellPoint has delivered positive earnings surprises in all the last four quarters, with an average beat of 18.1%, it is likely that the company may outperform estimates even in the fourth quarter and full-year of 2013. The company is scheduled to release the results before the opening bell on Jan 29, 2014.
WellPoint currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the healthcare space include HCA Holdings Inc. (HCA), VCA Antech Inc. (WOOF) and LCA-Vision Inc. (LCAV). All these stocks carry a Zacks Rank #2 (Buy).
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