HMS Holdings (HMSY) Defended at Wells Fargo

Wells Fargo reiterated an Outperform rating on HMS Holdings (NASDAQ: HMSY). Shares declined following negative comments from Off Wall Street. Analyst Jamie Stockton views weakness as a buying opportunity.

"Shares of HMSY are off 5% this morning (4/14) vs. a 1% positive move in the S&P. The company was hit by a short report that basically highlighted things we already know: core COB has been weak as traditional Medicaid lives transitioned to managed care (which the report indicates will continue), uncertainty exists around the Medicare RAC contract (which the report indicates will result in a less profitable contract and could delay revenue until 2016), and HMSY is looking primarily to its commercial business (where the report says competition is more significant) for sustained growth in the long run," said Stockton.

"We would be buyers on this weakness. The core COB business has definitely underwhelmed growth expectations for the last two years. However, the transition of most Medicaid lives to managed care has already occurred (with the exception of the very important ''dual eligibles,'' which should transition much more slowly). HMSY has already felt the headwind of lost services around most Medicaid lives and has an opportunity to rebuild going forward with the managed care providers. Concerns around Medicare RAC have been exhausted (literally, we do not believe the current share price reflects any value for the Medicare RAC contract)," added the analyst. We could get some movement in the next week or two if the GAO rules against HMSY's," added the analyst.

For an analyst ratings summary and ratings history on HMS Holdings click here. For more ratings news on HMS Holdings click here.

Shares of HMS Holdings closed at $17.18 yesterday.

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