S&P Maintains Health Net Ratings - Analyst Blog

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Standard & Poor's Ratings Services ("S&P") reaffirmed the long-term counterpart credit rating (CCR) of Health Net Inc. ( HNT ) at "BB," with a stable outlook. The rating agency also affirmed the long-term CCR as well as the financial strength rating (FSR) of "BBB-" for the company's subsidiaries - Health Net of California Inc. and Health Net Life Insurance Co.

Additionally, S&P raised the long-term CCR and FSR of two other Health Net subsidiaries - Health Net of Arizona Inc. and Health Net Health Plan of Oregon Inc. - to "BBB-" from "BB+." The rating agency also maintained a stable outlook on all the ratings, which indicates low possibility of a rating change within a year. However, any significant weakening of the financials or a substantial non-operating expense could lead to downward revision of the ratings.

The strong ratings reflect Health Net's profitable business mix as well as strong risk profile, which offset concerns related to the limited geographic expansion and product portfolio. The company's current non-risk to risk business ratio stands at 27:23.

Moreover, Health Net's operating efficiency leads to steady income as well as strong cash flows. Additionally, the TRICARE contract facilitates strong cash flow generation, while the earnings before interest, taxes, depreciation and amortization (EBITDA) coverage, interest coverage and fixed charge coverage ratios remain impressive. The strong ratios and cash flows support the retention of the CCR assigned to the company.

Currently, the Zacks Consensus Estimate for Health Net's second-quarter 2012 earnings stands at 69 cents per share, down 9.5% year over year. 10 of the 13 estimates moved downward in the last 30 days, while no upward revision was witnessed.

For 2012, the Zacks Consensus Estimate is pegged at $2.25 per share, down 27% year over year. Health Net competes with WellPoint Inc. ( WLP ) and UnitedHealth Group Inc. ( UNH ).

Currently, Health Net carries a Zacks #4 Rank (short-term Sell rating), implying a slight downward pressure on the shares in the near term. Considering the fundamentals, we are also maintaining our long-term Neutral recommendation on the stock.


 
HEALTH NET INC (HNT): Free Stock Analysis Report
 
UNITEDHEALTH GP (UNH): Free Stock Analysis Report
 
WELLPOINT INC (WLP): 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: FSR , HNT , UNH , WLP

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