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Centene and Wellcare Health Plans: The Word on Wall Street

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Analysts’ recommendations and target price

Wall Street analysts expect an upside potential of 53.80% for Centene (CNC), based on the company’s trading price of $51.06. In 2019, analysts have revised the company’s target price upward from $78.10 in January to $78.53 in February and reiterated the target price of $78.53 in March.

Wall Street analysts expect an upside potential of 28.07% for WellCare Health Plans (WCG), based on the company’s trading price of $253.81. In 2019, analysts first raised the company’s target price from $308.00 in January to $326.38 in February before reducing it slightly to $325.06 in March.

The current consensus analyst recommendation for both Centene and WellCare Health Plans is “buy.”

Of the 19 analysts covering Centene, seven recommend a “strong buy,” nine recommend a “buy,” and three recommend a “hold.” The highest and lowest target price estimates for the company are $90 and $66, respectively.

Of the 15 analysts covering WellCare Health Plans, five recommend a “strong buy,” seven recommend a “buy,” and three recommend a “hold.” The highest and lowest target price estimates for the company are $360 and $298, respectively.

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Deal synergies

According to a Centene–WellCare investor presentation, this deal is expected to become adjusted-EPS-accretive by a mid-single-digit percentage in the second full year after the transaction completes. Companies also expect to realize $500 million in cost synergies in the second full year after the deal’s completion.

According to the press release, the Centene–Wellcare Health Plans deal is expected to create managed care organization with pro forma fiscal 2019 revenues of $97 billion and proforma fiscal 2019 EBITDA of $5.0 billion. The combined company is expected to have 22 million members enrolled in government-sponsored programs across 50 US states. Plus, according to the press release, the combined company is also expected to have five million Medicare members, of which 1 million will be enrolled in Medicare plans while 4 million will be enrolled in Medicare PDP (Part D Program).

 

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