NEW YORK (AP) — Shares of WellCare Health Plans Inc. rose Monday after a Wedbush analyst said she expects the health insurer to gain more members, and raised her profit estimates for the company.
THE SPARK: Based on recent Medicare data, analyst Sarah James said she is raising her estimates for WellCare's insurance enrollments in the third quarter. Because of that, she raised her profit estimate for next year to above the average analyst estimate for the company, as measured by a FactSet poll.
THE BIG PICTURE: The Tampa, Fla., company manages Medicaid coverage in Florida, Georgia, and several other states, and sells Medicare Advantage plans, which are privately run versions of the Medicare health program for disabled people and senior citizens. WellCare is one of the largest Medicaid providers in Florida. It is scheduled to report its third-quarter results Nov. 2.
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THE ANALYSIS: James expects WellCare to earn $4.80 per share in 2011 and $4.26 per share in 2012, up from previous estimates of $4.78 and $4.23 per share. Analysts expect the company to earn $4.81 per share in 2011 and $4.04 per share in 2012, on average.
James' new earnings prediction hinged on her raising her enrollment estimate for WellCare's Medicare Advantage by 3,000 members and her estimate on its prescription drug plan by 18,000 members.
The analyst said the company has been successful in expanding its Medicare business, growing to 28 regions into its 2012 selling season from 22 the previous year. WellCare had 124,000 Medicare Advantage members and 950,000 prescription drug plan members as of June 30. The company also had 1.3 million Medicaid members.
SHARE ACTION: WellCare shares rose $1.17, or 3.1 percent, to $39.56 in afternoon trading, while broader markets also rose. The Dow Jones industrial average was up 2.4 percent.
WellCare stock peaked at $55.75 on July 7. Shares have fallen about 30 percent since then.
The peak this July was WellCare stock's highest price since October 2007, when the company's offices were raided by the FBI and Florida's attorney general's Medicaid Fraud Control Unit. In 2009 WellCare agreed to pay $80 million as part of a deal that allowed it to avoid criminal prosecution for health care fraud.
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