On Apr 23, 2013, we upgraded
Coventry Health Care Inc.
) to Outperform based on strong fundamentals, reflected by higher
revenues, strong balance sheet, efficient capital deployment and
stable ratings. Moreover, this Zacks Rank #2 (Buy) company is
improving its operating efficiencies through acquisitions and
Why the Upgrade?
Coventry's imminent takeover by
), scheduled to close by mid-2013, is projected to be beneficial
for the company. Aetna is a comparatively larger company than
Coventry with a stronger market position and higher credit
Moreover, Coventry uses its free cash for share repurchases
and acquisitions, thereby improving the bottom line. The company
repurchased 9.9 million shares for $328 million in 2012, thus
leaving 6.5 million shares under its existing repurchase
authorization as on Dec 31, 2012.
Further, the improved sales and the retention process
implemented since 2009 has transformed Coventry's Commercial Risk
business into a profitable one. The business contributed 41% of
the total operating revenue in 2012. Going ahead, the business is
likely to continue contributing to the company's earnings.
Coventry reported positive earnings surprise in 3 of the 4
quarters in 2012, with an average beat of 12.2%. The company is
expected to report its first-quarter earnings before the opening
bell on May 1, 2013. The Zacks Consensus Estimate for Coventry's
first quarter is currently pegged at 79 cents, representing a
year-over-year increase of 26.8%.
Other Stocks to Consider
Other health maintenance organizations worth considering are
Health Net Inc.
) - Zacks Rank #1 (Strong Buy) and
WellCare Health Plans Inc.
) - Zacks Rank #2 (Buy).
AETNA INC-NEW (AET): Free Stock Analysis
COVENTRY HLTHCR (CVH): Free Stock Analysis
HEALTH NET INC (HNT): Free Stock Analysis
WELLCARE HEALTH (WCG): Free Stock Analysis
To read this article on Zacks.com click here.