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Why Should You Add WellCare Health (WCG) to Your Portfolio?

Zacks Equity Research

WellCare Health Plans, Inc. WCG is well-poised for growth on the back of its growing top line and strategic initiatives.

The company has witnessed it 2019 and 2020 earnings estimates move north 0.1% and 0.3% north, respectively, over the past seven days.

The company also has an impressive Value Score of A.

It flaunts an impressive earnings surprise history, having exceeded the Zacks Consensus Estimate in the trailing four quarters, the average being 13.52%. This impressive surprise record speaks volumes for the company’s operating excellence.

The company’s return on tangible equity — a profitability measure — stands at 48.38% against its industry's negative 120.8%.

The company recently delivered solid first-quarter 2019 results. Its adjusted operating earnings of $3.69 per share beat the Zacks Consensus Estimate by 19% and also surged 49.4% year over year on the back of the Meridian buyout and organic growth.

Its top line has been improving consistently since 2016. The performance is evident from the metric’s 2012-2018 CAGR of 18.4% on the back of the company’s organic and inorganic growth strategies. Continuing with this trend, revenues for the first quarter grew 46% year over year, banking on the Meridian acquisition and robust contributions from its three lines of businesses, namely Medicaid, Medicare and Medicare PDPs. We expect the company’s revenues to continue rising owing to its solid strategies.

Courtesy of its strategic initiatives, the company’s Medicaid membership has been soaring over the past many years. Its Medicaid membership has strengthened at 17.1% average in the last three years. In the first quarter, membership was up 52.3% to 4.1 million, favored by the purchase of Meridian and a net organic uptick. Given the company's constant initiatives to expand its portfolio, its membership is likely to burgeon going forward.

WellCare Health has grown substantially through acquisitions and partnerships since 2013. Certain buyouts in the recent years significantly contributed to Wellcare Health's Medicaid business and helped diversifying its Medicaid portfolio. Additionally, the company’s strategic consolidations have enabled it to become the topmost Medicaid provider. Of late, the company signed a merger agreement with Centene to form the premier managed care enterprise with its focus on government-sponsored programs. All these initiatives poise the company well for growth.

The company is well-placed for growth, evident from its favorable VGM Score of B. Here V stands for Value, G for Growth and M for Momentum with the score being a weighted combination of all three factors.

The long-term earnings growth rate is expected at 15.9%, above the industry’s average of 13.6%, which is an upside for the company.

The Zacks Consensus Estimate for the company’s current-year earnings is pegged at $13.96, indicating an increase of 26.6% from the year-ago reported figure on revenues of $26.8 billion, which again implies a 31.1% rise from the prior-year reported number.

For 2020, the Zacks Consensus Estimate for earnings stands at $16.59 on $31.5 billion revenues, suggesting a respective 18.9% and 17.8% improvement from the year-earlier reported figures.

Shares of this Zacks Rank #2 (Buy) company have rallied 28% in a year's time, outperforming its industry’s growth of 2.3%.

Stocks to Consider

Investors interested in the medical sector can take a look at some other top-ranked stocks like The Joint Corp. JYNT, Molina Healthcare, Inc MOH and HCA Healthcare, Inc. HCA. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Joint Corp. develops, owns, operates, supports and manages chiropractic clinics. In the last four quarters, the company delivered average beat of 190%. It sports a Zacks Rank #1.

Molina offers Medicaid-related solutions to meet the health care needs of low-income families and individuals. It carries a Zacks Rank #2 (Buy). In the trailing four quarters, the company came up with average beat of 88.17%.

HCA Healthcare and units provide health care services. The company pulled off average positive surprise of 15.74% in the preceding four quarters. It has a Zacks Rank of 2.

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