Healthspring Inc.

Healthspring, Inc. (HS - Snapshot Report) has surprised on estimates 3 out of the last 4 quarters by an average of 6.45%. The stock is cheap. It trades at just 6.7x forward earnings and has a PEG ratio of 0.67.

Company Description

Healthspring coordinates care plans through the Medicare Advantage market in Alabama, Florida, Illinois, Mississippi, Tennessee and Texas. The company also provides a national stand-alone Medicare prescription drug plan.

Healthspring Surprised by 22.22% in the Third Quarter

On Oct 29, Healthspring reported its third quarter results and easily beat the Zacks Consensus by 14 cents per share. Earnings per share were 77 cents compared to the Zacks Consensus Estimate of 63 cents. The company reported 53 cents in the year ago period.

Premium revenue rose 26% to $649.8 million compared to the year ago period. Membership in the Medicare Advantage jumped 19.4% compared to the year ago period and was up 15.1% even when compared with the end of 2008. Stand-alone PDP member also grew 11.6% compared to the third quarter of 2008.

As it said in its second quarter results, the company again emphasized that its Florida and Part-D operations have been outperforming.

Raised 2009 Guidance

Given that its Florida business continues to be strong, the company raised full year EPS guidance to the range of $2.30 to $2.40 from its prior guidance of $2.10 to $2.25.

It also is bullish on the number of members it expects under the Medicare Advantage program. The range has been adjusted higher to 188,000-189,000 from 186,000-188,000.

Zacks Consensus Estimates Rise

Given the raised guidance, analysts have moved to raise estimates. For the fourth quarter, the Zacks Consensus is up 3 cents to 62 cents in the last 30 days.

The full-year Zacks Consensus Estimate rose 7.8% to $2.34 from $2.17 per share just a month ago which is in the company's new guidance range. All 9 analysts raised in that time. Analysts expect 2009 earnings growth of 10.43%.

Analysts are optimistic about 2010, despite the ongoing uncertainty about healthcare reform. They boosted estimates for the full year by 16 cents to $2.22 per share.

Value Fundamentals

Healthspring is a Zacks #1 Rank (strong buy) stock. It is trading with a price-to-book of just 1.06. The company has a 5-year average return on equity (ROE) of 14.65%.

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