Shares of Healthways Inc. surged Thursday, after the wellness program administrator reported a 29 percent jump in fiscal third-quarter profit on strong contract wins and backed its outlook for the full year.
The stock jumped $3.24, or 11 percent, to $33.88 in midday trading.
Late Wednesday, Nashville-based Healthways said it signed 29 new, expanded and extended contracts during the quarter, helping boost profits.
"Reflecting continuing employer demand for our solutions, we ended the quarter with contracts to provide services to over 1,000 self-insured employers, a 20 percent increase from the third quarter of fiscal 2007," said Ben R. Leedle Jr., president and chief executive, in a statement.
Healthways runs wellness and disease prevention programs targeting fitness, weight management, alternative medicine and smoking cessation, and which help patients with chronic conditions stay on their medication regimens.
Jefferies & Co. analyst Arthur Henderson expected the financial results to boost shares Thursday, but said concerns about economic sensitivity and weak third-quarter cash flows may keep many prospective investors at bay.
"While valuation remains compelling to us, it may be hard for HWAY's stock to exceed $40 in 12-months," Henderson wrote in a note to clients.
He said, though, that Healthways product and service offering remain "best in class," and the company should be able to weather economic downturns given the challenges that employers and health plans face with rising levels of chronic illness.
Stifel Nicolaus analyst Thomas Carroll reaffirmed a "Buy" rating on Healthways following its third-quarter report, saying management's renewed confidence in its 2008 outlook has alleviated some of his concerns pertaining to potential contract delays and the impact of workforce reductions.
Terms & Conditions
RSS Headlines
Fool UK