On Mar 8, Zacks Investment Research downgraded
Universal American Corp
) to a Zacks Rank #5 (Strong Sell) due to its weakening bottom
Why the Downgrade?
Universal American witnessed downward estimate revisions
following weak fourth-quarter 2013 results reported on Mar 5,
2014. The results included a huge negative surprise of 150.0%.
With this, the company delivered negative earnings surprises in
the last three consecutive quarters with an average miss of
159.9%. Shares of this life insurer lost nearly 4.9% since the
company reported disappointing results on Mar 5. Given its
of -14.3%, we feel the company is slated for difficult times
Universal American reported fourth-quarter net operating loss per
share of 5 cents. Results deteriorated significantly from the
year-ago quarter earnings of 16 cents and also missed the Zacks
Consensus Estimate of a loss of 2 cents.
The underperformance by Universal American was largely due to a
decline in its revenues along with an increase in expenses. Lower
net investment income as well as other income dragged the top
line, which declined 2.7% year over year. On the other hand, a
$97.7 million year-over-year increase in asset impairment charges
associated with APS Healthcare caused expenses to escalate, which
in turn, led to an operating loss.
Universal American's attempts to focus primarily on Medicare
Advantage markets are yet to show any desired positive results.
The acquisition of APS healthcare did not contribute to the
results as per expectation. Sluggish business renewals and lack
of growth catalyst in the intensely competitive healthcare
industry further add to the company's woes.
Over the last 7 days, the Zacks Consensus Estimate for 2014
slipped 9.5% to 21 cents per share as 3 out of 7 estimates were
revised downwards. Moreover, the estimate for 2015 decreased
14.6% to 35 cents over the same period.
Other Insurers worth a Look
We prefer to avoid Universal American for the time being.
However, investors interested in the life insurance industry may
consider better-ranked stocks like
Protective Life Corporation
Lincoln National Corporation
). All these stocks carry a Zacks Rank #2 (Buy).
LINCOLN NATL-IN (LNC): Free Stock Analysis
PROTECTIVE LIFE (PL): Free Stock Analysis
PRIMERICA INC (PRI): Free Stock Analysis
UNIVL AMERICAN (UAM): Free Stock Analysis
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