Wedbush Raises Price Target on HealthSpring (HS), Recent M&A Looks to Contribute Largely

Wedbush is reiterating its Outperform rating on shares of HealthSpring (NYSE: HS) as its raises its price target from $46 to $50.

The firm reports that HS's pipeline is more robust than last year and that its M&A has been larger than it has ever been. It forecasts that recent acquisitions may contribute $0.30 in earnings within its first year and $0.60 on a run rate basis.

The company currently has $172 million in free cash and has the potential to raise $416 million through the debt market if needed. The firm is anticipating a guidance update soon.

HS should benefit from continued low hospital utilization trends, shows the firm's recent consumer and provider surveys.

An analyst at Wedbush comments, "We view HS as an attractive way to access the Medicare growth cycle and see a positive risk-reward scenario in 2011. Risks to the attainment of our price target include the potential for government set rate increases to be insufficient to cover increases in cost trends. Other risks include potential legislation that could impact Medicare enrollment as well as increased competition."

The firm is maintaining its 2011 and 2012 EPS estimates of $3.80 and $3.94, which are mixed with the Street's estimates of $3.73 and $4.04.

For more ratings news on HealthSpring click here and for the rating history of HealthSpring click here.

Shares of HealthSpring closed at $46.97 yesterday.

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