Estimates for WellCare Health Plans, Inc. (WCG - Free Report) have been revised upward over the past 30 days, reflecting analysts' optimism on the stock. The stock has seen the Zacks Consensus Estimate for 2019 earnings move 1.6% north over the same time frame.
The company is poised to gain from an expanding Medicaid business as government is increasingly turning to private players in order to manage costs of this program. Moreover, a huge baby boomers' population is driving demand for Medicaid, a health plan pertaining to the elderly as well as the underprivileged.
Shares of this Zacks Rank #1 (Strong Buy) stock have soared nearly 86% in the past year, outperforming the industry’s growth of 40%. The company is well-poised for growth, also apparent from its favorable Value Score of B. Our research shows that stocks with an impressive Value Style Score of A or B when combined with a bullish Zacks Rank of 1 or 2 (Buy) offer the best opportunities in the value investment space.
Now, let’s focus on some important factors that make the company an investor favorite.
Positive Earnings Surprise History: The company boasts a stellar earnings surprise history with an average trailing four-quarter beat of 53.89%. This highlights its operational excellence.
High Liquidity: WellCare Health enjoys a sturdy liquidity level, backed by its solid cash position. Its cash flow from operating activities has been witnessing a remarkable four-year CAGR of 55.6% during the 2013-2017 period. Cash flows continued to increase during the first half as well, which is likely to support its strong inorganic growth initiatives, which have been the main revenue driver.
Solid Revenues: The company’s improving top line since 2006 remains praiseworthy. Over the past five years (2012-17), revenues have witnessed a CAGR of 18% on the back of the company’s organic growth, acquisition and partnership strategies, premium rise etc. The first half of 2018 witnessed 11% year-over-year revenue growth.
Raised 2018 Guidance: The company lifted its 2018 guidance during the second quarter. It expects adjusted earnings per share in the range of $10.70-$10.90, up from the previous guidance of $10-$10.30 per share. It also upped its investment and other income, now projected between $90 million and $94 million, up from $72-$78 million, driven by the Fed rate hike and a multi-year investment strategy implementation. This should instill investors’ confidence in the stock.
Acquisitions Boosting Inorganic Growth: WellCare Health has been growing significantly through acquisitions and partnerships since 2013. Buyouts of Care1st Arizona and Advicare have been accretive to its portfolio over the past few years. Last year, it closed the consolidation of Universal American Corp, which in turn, fueled 28.7% year-over-year growth in Medicare Health Plans premiums during the first half of 2018. Recently, the company purchased Meridian Health Plan of Michigan, Inc., Meridian Health Plan of Illinois, Inc. and MeridianRx, together known as the Meridian. The deal is expected to generate more than $4.3 billion in 2018 total revenues for the company. Also, the transaction will add a proprietary Pharmacy Benefit Manager (PBM) platform to the company’s portfolio.
Growth Projections: The Zacks Consensus Estimate for current-year earnings per share is pegged at $10.79, representing a year-over-year increase of 26.6% on 18.2% higher revenues of $20.1 billion.
For 2019, the Zacks Consensus Estimate for earnings per share stands at $13.63 on $25.2 billion revenues, translating into a respective 26.2% and 25.8% year-over-year increase.
Further, the company’s estimated long-term (five years) EPS growth rate of 15.4%, greater than the industry’s earnings growth rate of 12.9%, promises rewards for investors.
Other Stocks to Consider
Investors interested in the Medical-HMO industry can also check out some other top-ranked stocks like Molina Healthcare, Inc (MOH - Free Report) , UnitedHealth Group Incorporated (UNH - Free Report) and Anthem, Inc. (ANTM - Free Report) .
Molina offers Medicaid-related solutions to meet the health care needs of low-income families and individuals. It sports a Zacks Rank of 1. In the past four quarters, the company came up with a whopping average beat of 164.17%. You can see the complete list of today’s Zacks #1 Rank stocks here.
UnitedHealth Group Incorporated operates as a diversified health care company in the United States. The stock carries a Zacks Rank #2 (Buy) and came up with an average four-quarter positive surprise of 3.7%.
Anthem operates as a health benefits company in the United States. With a Zacks Rank of 2, the company managed to pull off an average trailing four-quarter earnings surprise of 6.65%.
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