In an effort to increase the reach of its operations in Arizona,
WellCare Health Plans, Inc.
) entered into a definitive agreement with
) to buy some of the assets of Arcadian Health Plan, Inc.'s Desert
Canyon Community Care Medicare Advantage.
If approved by the regulatory bodies, the deal is expected to
complete by the end of this year. No other terms of the deal were
Per the agreement, starting January 1, 2013, members of Desert
Canyon in Mohave and Yavapai will become a part of WellCare in the
Arizona region. With this acquisition, the company will cater to a
larger section of people as it is committed to providing
cost-effective medical assistance to the people of the Arizona
With Arizona in its list, WellCare will be extending its
services to a dozen states now and serve more than 150,000 Medicare
Advantage members and 10,000 Medicare Prescription Drug Plan
The announcement comes on the heels of the divestiture
initiative undertaken by Humana in order to meet governmental
requirements for completing Arcadian Health's acquisition.
The company also announced that members availing Desert Canyon
Medicare Advantage plan will continue to enjoy the same benefits
and coverage as earlier in 2012. In case of any changes in the
plans and benefits for 2013, the members will be informed.
WellCare has a sound financial position with an increasing cash
and cash equivalent balance and comparatively fewer debt
obligations. Such strong financials should cushion the company's
acquisition procedure. It can either deploy its excess cash or opt
for debt financing. Also, It has a decent interest coverage ratio
that is way ahead of the sector average.
The recent acquisition is expected to aid WellCare's net income
and help the company in achieving adjusted net income of $5.20 -
$5.40 per share in 2012. The acquisition will also increase its
customer base that will allow the company to achieve its revenue
guidance of $7.0 - $7.1 billion in 2012.
WellCare is scheduled to release its second quarter results
before the bell on August 3. The Zacks Consensus Estimate for
earnings for the quarter is currently pegged at $1.23 cents per
share, representing an estimated year-over-year decrease of
Humana is scheduled to release its second quarter results before
the bell on August 6. The Zacks Consensus Estimate for earnings for
the quarter is currently pegged at $2.22 cents per share,
representing an estimated year-over-year decrease of 11.2%.
WellCare currently retains a Zacks #3 Rank, which translates
into a short-term Hold rating. Humana currently retains a Zacks #4
Rank, which translates into a short-term Sell rating.
HUMANA INC NEW (HUM): Free Stock Analysis
WELLCARE HEALTH (WCG): Free Stock Analysis
To read this article on Zacks.com click here.