Healthways Remains Neutral - Analyst Blog


We reiterate our Neutral recommendation for Healthways ( HWAY ). Second-quarter 2012 earnings per share of 15 cents beat the Zacks Consensus Estimate of 7 cents. Net income came in at $5.1 million, down 12.5% year over year. The results for the reported quarter reflect the loss of the Cigna ( CI ) contract.

Revenues increased almost 0.4% year over year to $170.2 million in the second quarter, surpassing the Zacks Consensus Estimate of $169 million. Revenues were driven by acknowledgement of performance-based fees. Upon exclusion of the Cigna contract, revenues improved 11% year over year.

Healthways inked 23 new, expanded or extended contracts in the quarter. This count included nine fresh contracts, one expanded contract, two expanded and extended contracts and 11 extended contracts.

For 2012, Healthways maintained its forecast revenues in a band of $665 million and $705 million. This estimate includes domestic revenues in the range of $638 million to $670 million and overseas revenues of about $27 million to $35 million.

The company maintained its forecast earnings per share in the range of 38 cents to 50 cents for 2012. The estimate includes an extra expenditure of 4 cents per share due to the refinancing of Healthways' senior credit facilities. This estimate comprises earnings per share from domestic sources in a range of 38 cents to 46 cents and from overseas operations in a band of zero to 4 cents. 

The Healthways model encourages people to make favorable lifestyle changes that lead to enhanced well-being, reduced healthcare costs, improved performance and economic value for customers. The company has invested in technology platforms that provide scalable support with large populations. It has tie-ups with a large proportion of U.S. health plans and counts many millions of lives in its customer base.

Due to its unique scalable business model, Healthways shares may present a long-term investment opportunity, although it may face many challenges in the short term.

Healthways is the leader in a strategically critical and rapidly evolving part of the health care services market. Its fitness program (SilverSneakers) for seniors is available at 14,000 centers across the U.S. and caters to several million eligible enrollees. Healthways competes with Express Scripts ( ESRX ) among others.

The stock retains a Zacks #3 Rank, which translates into a short-term Hold recommendation.

CIGNA CORP (CI): Free Stock Analysis Report
EXPRESS SCRIPTS (ESRX): Free Stock Analysis Report

HEALTHWAYS INC (HWAY): Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Business , Stocks

Referenced Stocks: CI , ESRX , HWAY

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