Healthspring, Inc.

Healthspring is weathering the Wall Street financial storm as revenues rose 47% in the second quarter. The company raised 2008 guidance on the back of strong Medicare premium revenues. Healthspring has a forward P/E of 9.40.

Company Description

Healthspring, Inc. (HS - Snapshot Report) coordinates care plans in Alabama, Florida, Illinois, Mississippi, Tennessee and Texas. It owns and operates Medicare Advantage plans and a national stand-alone Medicare prescription drug plan.

On July 29, Healthspring reported second quarter earnings and surprised by 60% or 27 cents per share. Net income surged 69% to $40.2 million, or 72 cents per share, from $23.8 million, or 42 cents per share in the second quarter of 2007. Analysts expected only 45 cents.

Healthspring has surprised on estimates 3 out of the last 4 quarters by an average of 28.83%.

Total revenues increased 47.7% to $566.7 million from $383.6 million in 2007. Medicare premium revenue rose 54% to $553.6 million compared to the year ago period.

The company continues to be optimistic going forward. With Medicare premiums such a large part of the company's revenues, HS is sensitive to any legislative changes in the Medicare program. Healthspring doesn't believe the recently passed Medicare bill will have a material impact on the company's business.

HS Raises 2008 Guidance

The company continues to see strong forward growth. It raised its earnings per share guidance to the range of $2.05 to $2.15.

Healthspring also maintained its revenue estimate for 2008 of between $2 billion to $2.2 billion.

Consensus Estimates Rise for the Full Year 2008

Given the increase in guidance, covering analysts scrambled to raise consensus estimates for 2008 in the last 60 days by 11.5% to $2.12 from $1.90 per share, which is at the high end of the company's guidance range.

Repurchase Program Continues

Healthspring continued to buyback shares under the previously announced share repurchase program that has been extended until June 30, 2009. The company repurchased 435,000 shares at the cost of $7.7 million, or $17.75 per share, during the quarter.

Value Fundamentals

Healthspring is a Zacks #1 Rank (Strong Buy) stock. It has a forward P/E of 9.4. Its price-to-book is 1.74. The company has a solid one year return on equity (ROE) of 16.29%.