Acquisition of Universal American Corp.
On April 28, 2017, WellCare Health Plans (WCG) announced the completion of the acquisition of Universal American Corp. This deal added 119,000 Medicare Advantage (or MA) members from major markets such as Texas, New York, and Maine to WellCare’s portfolio.
WellCare Health Plans also aims to leverage Universal American’s physician engagement in Texas and New York to forge new value-based provider relationships. Further, the company aims to improve its star ratings for its MA plans by sharing its best practices with those of Universal American.
WellCare Health Plans has projected its earnings per share (or EPS) accretion in the range of $0.60–$0.70 in the first year after the close of the transaction. The company also anticipates an incremental $0.10 EPS accretion starting in the second year after the close of the deal.
If these projections are correct, they could favorably affect WellCare Health Plan’s stock price as well as those of the iShares Core S&P MidCap ETF (IJH). WellCare Health Plans makes up ~0.46% of IJH’s total portfolio holdings.
Analysts’ recommendations for WellCare Health Plans
Of the 12 analysts covering WellCare Health Plans in May 2017, one rated the company as a “strong buy,” and two rated it as a “buy.”
Nine analysts rated WellCare Health Plans as a “hold,” and none rated it as a “sell” or a “strong sell.” Approximately 25% of analysts gave the company some form of “buy” recommendation.
Of the 22 analysts covering Aetna (AET) in May 2017, ~54.5% rated the company as a “buy.” Approximately 52.6% of the 19 analysts covering Humana (HUM) gave it “buy” recommendations in the month. Further, 96% of the 26 analysts covering UnitedHealth Group (UNH) rated the company as a “buy” in May.
In the next article, we’ll discuss the revenue guidance provided by WellCare Health Plans for 2017.