Leerink Partners Reiterates Outperform on WellCare Health Plans (WCG) Following In-Line 4Q

Leerink Partners reiterated an Outperform rating and $105.00 price target on WellCare Health Plans (NYSE: WCG) following the company's 4Q earnings report. The quarter results were reported in-line. Management reaffirmed 2016 EPS guidance at $4.35 to $4.60. Key metrics were good. Consolidated MLR of 85.9% beat consensus expectations of 88.5%, improving 340 bps YoY and 180 bps sequentially.

Analyst Ana Gupte commented, "We are more positive on WCG after the 4Q report delivered yesterday and reaffirm our OP rating at a PT of $105. The quarter was in-line with 2016 EPS guidance reaffirmed at $4.35 to $4.60. Key metrics were good with Consolidated MLR beating consensus, offset by a miss on SG&A ratio and a higher tax rate. Medicaid MLR and Part D MLR exceeded views while Medicare missed. We see few new incremental positives this quarter that increase our conviction on the name. First, the longer-term growth goal has been updated to a doubling of revenue in 5 years by 2021 at an After-tax (AT) margin of 2%. Secondly, parent cash is now at an attractive $650MM with the new credit facility bringing deployable cash to $1.25B for M&A across both horizontal and capability acquisitions that fuel the 2x by 2021 growth target. Thirdly, CMS looks poised to improve reimbursement for DSNP Medicare Advantage plans in the Feb. 19 rate notice with a new risk adjustment model and possibly action on low income quality STAR ratings as shown by our actuarial specialist and reflected in the 8%+ move on Tuesday (2/9). Finally, management is taking a lessons learned approach on the recent Iowa and NE contract losses with optimism on a go-forward Medicaid organic growth outlook. We modestly lower our 2016E EPS from $4.74 to $4.55 while remaining above consensus and aligning with the quarterly earnings commentary. Our medium-term growth estimates are 6%, 21% and 21% on revenue, operating earnings and EPS, respectively."

For an analyst ratings summary and ratings history on WellCare Health Plans click here. For more ratings news on WellCare Health Plans click here.

Shares of WellCare Health Plans closed at $77.57 yesterday.

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