On Apr 2, 2013, shares of
Coventry Health Care Inc.
) reached a 52-week high of $48.67.
Coventry reported positive earnings surprise in 3 of the 4
quarters in 2012, with an average beat of 12.2%. Further, our
proven model shows that this healthcare company is likely to beat
earnings in the first quarter of 2013 because it has a right
combination of Positive Zacks ESP (Read:
Zacks Earnings ESP: A Better Method
) and Zacks Rank #2 (Buy).
ESP (Earnings Surprise Prediction), which represents the
difference between the Most Accurate Estimate and the Zacks
Consensus Estimate is 9.09%. The Zacks Consensus Estimate for
Coventry's first quarter is currently pegged at 77 cents,
representing a year over year increase of 24.7%.
Moreover, Coventry is improving its operating efficiencies
through acquisitions and expansions. The impending takeover by
), scheduled to close by mid-2013, will allow the company to
cater to a larger market and open avenues for future partnerships
to improve the quality and affordability of its services.
Further, with no debt repayment scheduled in the next couple
of years, the company has ample scope for strategic acquisitions
as well as share repurchases and dividend payouts. A strong
balance sheet, efficient capital deployment and stable ratings
are the other positives.
The valuation of Coventry looks stretched. Although the
forward price-to-earnings ratio is higher than peers, the
price-to-book value ratio lags peers and the return on equity of
8.9% is substantially lower than the peer group average of 12.3%.
However, the 1-year return from the stock is 35.7%, much above
S&P's return of 11.5%.
Other healthcare stocks worth considering are
Health Net Inc.
) - Zacks Rank #1 (Strong Buy) and
) - Zacks Rank #2 (Buy).
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COVENTRY HLTHCR (CVH): Free Stock Analysis
HEALTH NET INC (HNT): Free Stock Analysis
LCA-VISION INC (LCAV): Free Stock Analysis
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