Why Shares of WellCare Health Plans, Inc. Jumped

Is this meaningful? Or just another movement?

May 6, 2014 at 12:59PM

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of WellCare Health Plans (NYSE:WCG) were getting an A-OK from investors today, climbing as much as 10% after reporting first-quarter earnings this morning.

So what: The health insurance provider said adjusted per-share profit jumped from $0.63 to $1.13, blowing earnings estimates of $0.04 per share out of the water. Those low estimates were due to projections earlier in the year from WellCare of a decline in profits due to fees relating to Obamacare. However, a number of factors drove the improvement in the quarter, including a benefit from a gain resulting from its acquisition of Windsor Health Group. Operating profits grew briskly as well, improving 63% as CEO Dave Gallitano attributed the jump to the "strong and growth performance of our Medicaid health plans." 

Now what: Looking ahead, WellCare lifted its full-year guidance because of the Windsor-related gain, "Medicaid results and outlook, greater traction in medical cost management initiatives, and productivity improvements." Management now expects full-year earnings of $4.40 to $4.75, up from a previous range of $3.75 to $4.05, and well ahead of analyst estimates at $3.97. The company also lifted its premium revenue guidance to $12-$12.1 billion, ahead of expectations, as premiums grew 32% in the first quarter. With growth like that, I wouldn't be surprised to see WellCare shares continue to move higher. 

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Jeremy Bowman and The Motley Fool have no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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