WellPoint Inc.'s second-quarter performance, which sent shares plummeting Wednesday, fuels some doubt about whether the health insurer can increase its enrollment without an acquisition and execute its business cleanly, according to a BMO Capital analyst.
The nation's second largest insurer said Wednesday its net income dropped more than 8 percent in the second quarter. It also chopped its earnings forecast for 2012 to a range of $7.30 to $7.40 per share from $7.57 per share after enrollment slipped in the quarter and medical costs jump in May.
Analysts expected, on average, earnings of $7.76 per share for the year.
WellPoint has made several acquisitions in the past year as it attempts to grow its business and prepare for the millions of people expected to buy health insurance in a couple of years on the health care overhaul's online exchanges. Company leaders told analysts Wednesday they believe these investments will pay off in future growth.
But its stock price sank 12 percent, or $7.41, to $54.01 on Wednesday, its biggest one-day drop in more than three years. The stock has fallen 18 percent so far in 2012 after closing 2011 at $66.25.
WellPoint shares started falling soon after the insurer released its earnings report Wednesday. During a conference call with analysts, WellPoint executives faced questions about support from the company's board of directors. Late Wednesday, the Indianapolis insurer issued a statement saying that its board has been "fully involved in the strategy WellPoint is pursuing and is supportive of the strategy and our management team."
BMO Capital Markets analyst Dave Shove, however, lowered his rating on the company's stock to "Market Perform" from "Outperform."
"We continue to believe in the powerful Blue brand and anticipate it will be a major competitor in 2014's exchange landscape, but in the near term we have lost conviction," the analyst wrote in a Thursday morning research note.
WellPoint runs Blue Cross Blue Shield plans in 14 states — including California, New York and Ohio — and covers 33.5 million people.