WellCare Health Slips to Sell - Analyst Blog


Zacks Investment Research downgraded WellCare Health Plans, Inc. ( WCG ) to a Zacks Rank #4 (Sell) on Jan 18, 2014.

Why the Downgrade?

Over the last 30 days, estimates moved downwards leading to an approximately 2.7% decline in the Zacks Consensus Estimate for full-year 2014 to $5.14 per share. In fact, WellCare has been witnessing downward estimate revisions since it reported third-quarter 2013 results.

WellCare's third-quarter earnings per share of $1.56 per share were higher than the year-ago number as well as the Zacks Consensus Estimate. However, the company is expected to incur higher selling, general and administrative expenses owing to the Florida MMA program implementation in the fourth quarter of 2013 which is likely to dampen the company's performance for full-year 2013.

The implementation of the Florida MMA program along with the integration of the acquisitions that are projected to increase the selling, general and administrative expenses impelled WellCare to slash its full-year 2013 adjusted net income guidance to $4.70-$4.80 per share from $470-$4.90 per share. The Zacks Consensus Estimate for full-year 2013 is pegged at $4.70 per share, reflecting a year-over-year decline of 4.4%.

SG&A expenses also increased 28% from the prior-year period. Further, memberships have been declining in the Prescription Drug Plan segment of the company. Over the first nine months in 2013, memberships declined 11% year over year owing to the CMS rules. Additionally, WellCare has been issuing debts to meet its capital needs. It issued notes worth $600 million in Nov 2013 to fund organic growth opportunities and acquisitions. A significant increase in the company's debt burden might pose significant threat on the company's financial position.

WellCare is scheduled to release its fourth quarter and full-year 2013 results on Feb 12, 2014. The Zacks Consensus Estimate for the fourth quarter is pegged at $1.18 per share, representing a year-over-year decline of 10.7%. Also, our proven model shows that WellCare will lag earnings estimate as it has Zacks Rank a #4 and Earnings ESP of -3.39%

Other Stocks to Consider

However, some better-ranked stocks in the healthcare services space include VCA Antech Inc. ( WOOF ), Addus HomeCare Corporation ( ADUS ) and LCA-Vision Inc. ( LCAV ). All three carry a Zacks Rank #2 (Buy).

ADDUS HOMECARE (ADUS): Free Stock Analysis Report

LCA-VISION INC (LCAV): Free Stock Analysis Report

WELLCARE HEALTH (WCG): Free Stock Analysis Report

VCA ANTECH INC (WOOF): Free Stock Analysis Report

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Zacks Investment Research

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: ADUS , LCAV , WCG , WOOF



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