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Healthways Partnership Expands But Stock Down

Zacks Equity Research

After health insurance provider CareFirst strengthened its partnership with Healthways Inc. (HWAY) by making a strategic investment of $20 million in the latter, another independent licensee of the Blue Cross and Blue Shield Association expanded its partnership with the well-being solutions provider. However, the stock continued to fall due to weak fundamentals in the broader industry.

Under the expanded partnership, Blue Cross and Blue Shield of Alabama will start offering Healthways’ SilverSneakers Fitness Program to its C Plus Medicare Select members in Alabama from January next year. The association has been offering the SilverSneakers program to Medicare Advantage members since January this year.

SilverSneakers Fitness Program is a widely accepted exercise program specifically tailored for older people. It was founded in 1992 and serves more than 10 million members. The program involves people in training, aerobic, and flexibility exercises that lead to improved well-being and lower health care costs.

The recent investment of CareFirst in HWAY is aimed at bringing further growth and innovation in its Patient Centered Medical Home (:PCMH) program, which serves more than a million members with an emphasis on patients with multiple chronic conditions.

Healthways provides services and technology to the PCMH program as well as Disease Management services to CareFirst members. With the additional investment, the companies expect further opportunities for growth in PCMH program.

HWAY provides focused and complete solutions which enable people to improve their physical, emotional and social well-being. Its fitness center network provides access to more than 15,000 fitness and wellness facilities in the U.S.

In the second quarter of the year, Healthways reported second-quarter 2013 loss per share of 3 cents, narrower than the Zacks Consensus Estimate and the company’s expectations of a loss of 5 cents per share. However, the result is worse than the year-ago earnings of 15 cents per share.

Revenues declined 4.7% year over year to $162.3 million in the quarter, trailing the Zacks Consensus Estimate of $171 million. However, upon exclusion of the two terminal contracts, revenues improved 11.7% from the prior-year quarter.
HWAY affirmed its sales guidance for 2013. The company continues to expect sales in a band of $710 million–$750 million, reflecting a rise of 5%–11% year over year. It expects higher revenues for 2013 despite a drop of $80 million on account of the termination of two contracts. Healthways forecasts higher sales in the second half of 2013 as fresh contracts inked in 2012 take off in the upcoming quarters.

However, Healthways tweaked its outlook for bottom line to reflect the effect of its cash convertible senior notes due 2018. The company expects earnings per share of about 18 cents–28 cents compared with prior outlook of 25 cents–35 cents for 2013.

Healthways currently carries a Zacks Rank #3 (Hold). While we remain on the sidelines about the company, other scrips that are worth a look in the medical services industry include BG Medicine, Inc. (BGMD), Covance Inc. (CVD) and PAREXEL International Corporation (PRXL). All of them carry a Zacks Rank #2 (Buy).

Read the Full Research Report on CVD
Read the Full Research Report on HWAY
Read the Full Research Report on PRXL
Read the Full Research Report on BGMD

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