Back to top

Image: Bigstock

WellCare Scales 52-Week High: Can it Sustain the Bull Run?

Read MoreHide Full Article

On May 30, 2018, shares of WellCare Health Plans, Inc. hit a 52 week high of $232.04, eventually closing the session at $227.12. The upside in share price can be attributed to a number of positive developments.

Catalysts Propelling the Stock

Meridian Buyout: The stock seems to have gained investors’ attention post the recent announcement of the acquisition of Meridian for $2.5 billion . It includes Meridian Health Plan of Michigan, Inc, Meridian Health Plan of Illinois, Inc, and pharmacy benefit manager (PBM) MeridianRx.

The transaction will close by the end of 2018. Meridian is expected to generate revenues of $4.3 billion. The deal will fortify WellCare’s Medicaid and pharmacy benefits management business.

Investors are optimistic regarding the deal which is expected to add 40-50 cents to WellCare's adjusted earnings per share in 2019, 70-80 cents of accretion in 2020 and more than $1.00 of accretion in 2021.

Strong Earnings: The company’s strong first-quarter 2018 results, released on May1, was applauded by investors. Its businesses —  Medicaid, Medicare Health Plans and Medicare Prescription Drug Plans — drove earnings in the quarter under review.

The company’s bottomline earnings grew 53% year over year and beat estimates by a good 27%

Backed by overall strong earnings, the company raised its 2018 adjusted EPS in the range of $10-$10.30 from the previous projection of $9.55-$9.85. This reflects an improvement in all three segments' medical benefit ratios.  

Medicaid Contracts: The receipt of Medicaid contracts is projected to have driven the stock. The company was awarded three new Medicaid contracts in its current markets of Florida, Arizona and Hawaii. These agreements will enable the company to retain its existing business and boost revenues.

WellCare was also selected as the new sole contractor for the statewide Serious Mental Illness Specialty Plan. Services under the new contract are expected to begin by the end of 2018.

The stock has surged 32% in a year’s time compared with the industry’s rally of 35.5%.

Can We Expect an Uptrend?

WellCare’s significant market positioning in the Medicaid and Medicare business will sustain its performance, going forward. These government businesses are in high demand, courtesy of changing demographics with increasing baby boomers population. This trend is expected to boost the company’s performance and drive earnings as well as share price.

The Zacks Consensus Estimate for current-year and 2019 earnings have been revised at 4.4% and 6.1% upwards, respectively, over the last 30 days. This reflects analysts’ optimism over the stock, which is a favorable factor.

WellCare sports a Zacks Rank #1 (Strong Buy). A few other top-ranked companies from the healthcare space include Halyard Health, Inc , Encompass Health Corporation (EHC - Free Report) and Tenet Healthcare Corporation (THC - Free Report) . Al these stocks touched their respective 52 week high on the same day. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

 Will You Make a Fortune on the Shift to Electric Cars?
Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.

With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.

It's not the one you think.

See This Ticker Free >>


See More Zacks Research for These Tickers


Normally $25 each - click below to receive one report FREE:


Tenet Healthcare Corporation (THC) - free report >>

Encompass Health Corporation (EHC) - free report >>

Published in