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WellCare Health Guides for 2017, Remains an Outperformer

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Recently, WellCare Health Plans, Inc. came up with its detailed guidance for 2017. Alongside, it also reaffirmed its 2016 guidance.

The 2017 guidance reflects an increase from the 2016 expected earnings driven by strong business throughout this year and optimism surrounding the operating environment in 2017. The company’s favorable performance this year is also reflected in its share price which is up 76.2% year to date, significantly above the Zacks categorized HMO industry’s gain of 26.1%.

Strong growth both in the top and the bottom line along with stellar premium and investment income growth has led to the outperformance. Moreover, a robust liquidity position backed by strong cash flow generation has helped the company to invest in strategic initiatives which in turn have accelerated its growth.

Coming to the latest guidance, the company expects to earn on a per share basis in the range of $6.00 to $6.25 in 2017 compared with $5.35 to $5.45 expected for 2016. This guidance takes into account top-line growth from organic growth and the Care1st Arizona acquisition.

At the midpoint of the guidance range, the EPS guidance represents nearly 18% year-over-year growth. EPS growth will be driven by continued Medicare Advantage margin expansion, organic growth in Medicaid and Medicare and the Care1st Arizona acquisition, partially offset by Georgia Medicaid membership decline with the addition of the fourth managed care plan and Prescription Drug Plan margin reset.

Total adjusted premium revenue is forecast in the range of $15.225 billion to $15.9 billion compared with $13.775 billion to $13.975 billion expected for 2016. Projected investment income of $18 million to $21 million is higher than $15 million to $16 million expected for 2016.

Medicaid health plans’ adjusted premium revenue for 2017 is expected at $10.4 billion at the midpoint of the guidance range, translating into a nearly 13% year-over-year growth rate from the 2016 guidance of $9.2 billion.

Medicare health plans’ adjusted premium revenue for 2017 is expected at $4.2 billion at the midpoint of the guidance range, which translates into a nearly 9% year-over-year growth rate from the 2016 guidance of $3.86 billion.

The company will use its capital for organic growth as well as for mergers and acquisitions. On the capital deployment front, the company will use $157.5 million to buy Care1st Health Plan Arizona and $800 million for the acquisition of Universal American Corp. announced last month.

WellCare Health carries a Zacks Rank #1 (Strong Buy). Other stocks worth considering in the same space include Magellan Health, Inc. and UnitedHealth Group Inc. (UNH - Free Report) .

Magellan Health posted a positive earnings surprise in three out of the past four quarters, with the average being 42.6%. It currently carries a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

UnitedHealth Group posted a positive earnings surprise in each of the past four quarters, with the average being 3.86%. It carries a Zacks Rank #2 (Buy).

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