Credit Suisse Maintains an 'Outperform' on Coventry Health Care (CVH); Buy on 6% Drop; Raising Estimates & PT

Credit Suisse maintains an 'Outperform' on Coventry Health Care (NYSE: CVH), PT increased from $34 to $37.

Credit Suisse analyst said, "Sell-off Unwarranted: CVH -6% we believe on misinterpretation of management comments regarding pricing and margin upside potential due to MLR minimum regs. We confirmed after the earnings call only 17% of premiums are in rebate position while for the other 83%, lower cost trend will result in EPS upside. With 21% of market cap, $6.70/share, in free cash at parent earning low interest, we expect CVH to undertake an accretive acquisition or share repurchase. CVH may also be an acquisition candidate given attractive mix of Medicare, Medicaid and commercial."

"We increase our '11 EPS +10c to $2.95 vs. revised "core" EPS guidance of $2.57-$2.77. Our new '11 EPS assumes SG&A and consolidated MLR near the low-end of guidance, and $250mn share repos 2H11. We raise our 2012E-13E EPS to $3.25 (+25c) and $3.60 (+45c), respectively, +10.5% CAGR. We model $250mn/yr in share repos 2012-13."

For more ratings news on Coventry Health Care click here and for the rating history of Coventry Health Care click here.

Shares of Coventry Health Care closed at $33.66 yesterday.

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