We upgrade our recommendation for
) to Outperform. Second-quarter 2012 earnings per share of 15 cents
beat the Zacks Consensus Estimate of 7 cents. We expect a
sequential pickup in earnings as performance linked contracts are
activated with the passage of 2012.
EXPRESS SCRIPTS (ESRX): Free Stock Analysis
HEALTHWAYS INC (HWAY): Free Stock Analysis
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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. Brisk
contract activity may enable the company to gradually get over the
loss of the Cigna Corp. (CI) contract in the third quarter of 2011.
The company has invested in technology platforms that provide
scalable support with large populations. Its Embrace technology
setup won the company a top 10 position as a technology adopter. It
is believed that Embrace will enable Healthways to integrate data
from all the health care entities with which an individual
interacts (to the extent that data is available
The company has tie-ups with 80% of U.S. health plans and counts
about 39 million lives in its customer base. Growth in the U.S. is
expected to slow down, and total billable lives may stagnate, which
will be partly offset by cross-sell opportunities. Also, on the
tepid side, Healthways considers itself to be a global well-being
company but overseas contract wins have been restricted to just a
few countries. Moreover, cash flow remains modest.
Healthways competes with
) among others. The stock retains a Zacks #2 Rank, which translates
into a short-term Buy rating.