WellCare Scales 52-Week High: Can It Sustain The Bull Run?
Zacks Investment Research | May 30, 2018 10:26PM ET
On May 30, 2018, shares of WellCare Health Plans, Inc. (NYSE:WCG) hit a 52 week high of $232.04, eventually closing the session at $227.12. The upside in share price can be attributed to a number of positive developments.
Catalysts Propelling the Stock
Meridian Buyout: The stock seems to have gained investors’ attention post the recent announcement of the acquisition of Meridian for $2.5 billion . It includes Meridian Health Plan of Michigan, Inc, Meridian Health Plan of Illinois, Inc, and pharmacy benefit manager (PBM) MeridianRx.
The transaction will close by the end of 2018. Meridian is expected to generate revenues of $4.3 billion. The deal will fortify WellCare’s Medicaid and pharmacy benefits management business.
Investors are optimistic regarding the deal which is expected to add 40-50 cents to WellCare's adjusted earnings per share in 2019, 70-80 cents of accretion in 2020 and more than $1.00 of accretion in 2021.
Strong Earnings: The company’s strong first-quarter 2018 results, released on May1, was applauded by investors. Its businesses — Medicaid, Medicare Health Plans and Medicare Prescription Drug Plans — drove earnings in the quarter under review.
The company’s bottomline earnings grew 53% year over year and beat estimates by a good 27%
Backed by overall strong earnings, the company raised its 2018 adjusted EPS in the range of $10-$10.30 from the previous projection of $9.55-$9.85. This reflects an improvement in all three segments' medical benefit ratios.
Medicaid Contracts: The receipt of Medicaid contracts is projected to have driven the stock. The company was awarded three new Medicaid contracts in its current markets of Florida, Arizona and Hawaii. These agreements will enable the company to retain its existing business and boost revenues.
WellCare was also selected as the new sole contractor for the statewide Serious Mental Illness Specialty Plan. Services under the new contract are expected to begin by the end of 2018.
The stock has surged 32% in a year’s time compared with the Original post
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