WellPoint Falls Hard on Medicare Woes

[Stocks-to-Watch]

WellPoint’s (WLP) Medicare Advantage costs jumped in the fourth quarter as higher-risk patients flooded into one of its California plans, causing the insurer to miss analysts earnings expectations. Shares fell 6% in midday trading.

The health insurer posted 96 cents of EPS, against expectations for $1.12.* The company’s Northern California business struggled with higher costs after a competitor left the market and higher-risk patients joined WellPoint’s plan. In general, health insurers have been benefiting in the past year or so from lower costs as people use fewer medical services.

WellPoint’s 2012 EPS guidance for $7.60 is below expectations for $7.75.

“This is consistent with buy side expectations,” wrote Bernstein analyst Ana Gupte. “Nonetheless, the company needs to show some ‘Beat and Raise’ in 2012, as investors have come to expect at least modest revisions upward from this sector. The company’s track record of execution over the last several years has been spotty, so delivering strong 2012 performance is important to see performance upside.”



Original Article Source by Barrons.com