WellPoint Inc. has recently announced a couple of agreements that reflect the company’s strong focus on core business and its intent to capitalize on core growth opportunities. These announcements are related to the divestiture of two of its business units to enhance its insurance operations.
The first announcement is pertaining to the divestiture of its online contact lens retail subsidiary 1-800 CONTACTS to Thomas H. Lee Partners, one of the world’s leading private equity firms. Although the financial terms of the transaction were not disclosed, management stated that the proceeds from the deal that is slated to culminate in the first quarter of 2014 will be used to fund WellPoint’s capital deployment initiatives.
Although the 1-800 CONTACTS subsidiary is a well-known name in the contact lens retail space, WellPoint decided to opt for the divestiture as it strives to enhance its core operations. And now with the changes that are scheduled to come to the health care system, the company is all the more focused to capitalize on the opportunities by divesting its non-core operations and fortifying its commercial and government business segments.
Concurrently, WellPoint also announced its intention to divest its eye glasses business – glasses.com to one of the premium eyewear company, Luxottica Group. The terms of the deal were not disclosed. This deal is pending regulatory approval and is scheduled to close in the first quarter of 2014.
The company expects to incur an impairment charge of around 52–57 cents per share in the fourth quarter of 2013, pertaining to these divestitures. As a result, WellPoint now estimates full-year 2013 GAAP net income to be at least $7.88 per share while adjusted net income outlook was retained at a minimum of $8.40 per share. However, we remain optimistic on the company’s performance owing to its strong financial position and efforts to improve memberships. Thus, our projected adjusted net income is pegged a little higher than the company outlook and the Zacks Consensus Estimate for full-year 2013 at $8.51.
WellPoint provides a wide range of specialty and other insurance products like behavioral health insurance, dental, vision, life and disability insurance benefits. The company has been reviewing potential strategic transactions to improve its business portfolio and enhance its distribution capacities. We believe that the above deals are at par with the company’s strategies and should help it boost its core efficiencies and make way for more revenue generation.
WellPoint currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the healthcare space include Addus HomeCare Corporation (ADUS - Free Report) , VCA Antech Inc. and LCA-Vision Inc. . All these stocks carry a Zacks Rank #2 (Buy).