Zacks Investment Research upgraded WellPoint Inc. to a Zacks Rank #2 (Buy) on April 1, 2014.
Why the Upgrade?
WellPoint has been witnessing upward estimate revisions after the company raised its outlook for full-year 2014. This announcement has driven bullish sentiment leading to a 0.5% increase in the Zacks Consensus Estimate for full-year 2014 to $8.40 per share and 1% increase for full-year 2015 to $9.10 per share, over the last 7 days.
In its latest guidance on 2014, published on March 21, 2014, WellPoint stated that it expects full-year 2014 net income to exceed $8.20 per share, higher than the previous guidance of over $8.00 per share. The outlook was raised on the back of projected growth of 1–1.3 million or 3–4% in new medical members, 4% in operating revenue and 5% operating gain.
WellPoint has been undertaking a number of marketing and enrolment initiatives that are expected to boost memberships in 2014. Moreover, the company’s core business enhancement initiatives are also quite impressive and position the company to capitalize on core growth opportunities. Toward this end, WellPoint has resorted to divestitures in 2014. The company vended its online contact lens subsidiary, 1-800 CONTACTS and the eye glasses business – glasses.com in Feb 2014.
The capital deployment initiatives have also been impressive in the past. WellPoint increased the quarterly dividend by 17% in Jan 2014. Moreover, the company repurchased shares worth $2.1 billion in 2013 and through Feb 7, 2014. As a result, share count stood at 303.8 million at the end of 2013. WellPoint expects to engage in more share repurchases in 2014, thereby reducing share count by 6%.
Previously, the company reported decent fourth-quarter 2013 earnings that successfully exceeded the Zacks Consensus Estimate. However, the bottom-line results declined year over year. The top line, on the other hand, fared well on both counts. Notably, the company also witnessed upward estimate revisions for 2014 and 2015 on favorable earnings. Thus, post earnings, over the last 60 days, the company witnessed a 0.5% and 0.6% increase, respectively, in the Zacks Consensus Estimate for 2014 and 2015.
Other Stocks to Consider
Other players in the healthcare services space which look attractive at current levels include Aetna Inc. (AET - Analyst Report) , Chemed Corp. (CHE - Analyst Report) and MEDNAX, Inc. (MD - Snapshot Report) . While Chemed sports a Zacks Rank #1 (Strong Buy), Aetna and MEDNAX carry the same Zacks Rank as WellPoint.