We have reiterated our Neutral recommendation on
) based on its strong first-quarter earnings, leading market
position, diversified product portfolio, efficient capital
management and strategic acquisitions. A hike in dividend as well
as an improved guidance for 2013 instills confidence in this
Zacks Rank #2 (Buy) stock.
WellPoint's debt-to-capital ratio is currently higher than the
average for the health and managed care sector and even exceeds
the targeted range of 25%-35%, as indicated by the bank
covenants. Moreover, the company is witnessing lower cash flow
and higher benefit expense ratio and total expenses.
However, these negative factors are offset by the various
positives. WellPoint's independent license for marketing products
under the Blue Cross Blue Shield Association is one of its key
strengths. Moreover, the company regularly undertakes
acquisitions to grow inorganically.
WellPoint also effectively manages its capital via share
buybacks and dividend payment. The company increased the
quarterly dividend by 30% and spent $453.6 million on share
repurchases in the first quarter of 2013.
On Apr 24, 2013, WellPoint reported first-quarter 2013
adjusted income of $2.94 per share, beating the Zacks Consensus
Estimate of $2.37. Adjusted income also surpassed the year-ago
earnings of $2.34 per share by 25.6%.
WellPoint generated positive earnings surprise in 3 out of the
last 4 quarters, with an average beat of 11.39%. The company did
not witness any estimate revisions in the last 30 days. Thus, the
Zacks Consensus Estimate for WellPoint's 2013 earnings stands at
$8.01 per share.
Other Stocks to Consider
Apart from WellPoint, other stocks in the health maintenance
organizations worth considering are
Molina Healthcare Inc.
) - Zacks Rank #1 (Strong Buy),
) - Zacks Rank #1 (Strong Buy) and
Health Net Inc.
) - Zacks Rank #2 (Buy).
AETNA INC-NEW (AET): Free Stock Analysis
HEALTH NET INC (HNT): Free Stock Analysis
MOLINA HLTHCR (MOH): Free Stock Analysis
WELLPOINT INC (WLP): Free Stock Analysis
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