On Jun 10, 2013, the shares of WellPoint Inc. reached a 52-week high of $79.78. The momentum was driven by the company’s strong first-quarter results, which included a 24.1% positive surprise.
Further, WellPoint’s leading market position, diversified product portfolio, efficient capital management and strategic acquisitions provide the fundamental strength required to drive share value. With respect to earnings trend, the company delivered positive earnings surprise in 3 of the past 4 quarters, with an average beat of 11.4%.
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%.
Operating revenues of WellPoint for the reported quarter were $17.5 billion, up 15.8% from the year-ago quarter. Revenues, however, lagged the Zacks Consensus Estimate of $18.0 billion. The increase in revenues resulted from the acquisition of Amerigroup, partly offset by the decline in fully insured Local Group and Senior membership.
Additionally, WellPoint announced a 30% hike in its quarterly dividend to 37.5 cents per share on Feb 21, 2013. The company spent $2.9 billion on share repurchases and dividends in 2012, while it expects to deploy about $2 billion for the same in 2013.
However, the valuation of WellPoint looks reasonable. The shares are trading at a discount of 11.9% and 44% to its peers on a forward price-to-earnings basis and price-to-book basis, respectively, while the return on equity of 10.7% is 14.4% lower than the peer group average of 12.5%. Nevertheless, the year-to-date return from the stock was 30.6%, much above the S&P’s return of 15.2%.
WellPoint currently carries a Zacks Rank #2 (Buy). Other health maintenance organizations worth considering are Molina Healthcare Inc. (MOH - Analyst Report) – Zacks Rank #1 (Strong Buy), Aetna Inc. (AET - Analyst Report) – Zacks Rank #2 (Buy) and Health Net Inc. (HNT - Analyst Report) – Zacks Rank #2 (Buy).