Tuesday, December 25, 2012

WellCare Shares Jumped: What You Need to Know

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Medicaid and Medicare coverage provider WellCare Health Plans (NYSE: WCG  ) popped 12% on Wednesday after the company's quarterly results and full-year outlook topped analyst expectations.

So what: WellCare's big fourth-quarter beat -- EPS of $1.96 versus the consensus of $1.19 -- clearly indicates that the growth in health-care use continues to be relatively slow. The stock is even hitting a new 52-week high on the news, suggesting that Wall Street fully expects that trend to continue. �

Now what: Looking ahead, management expects 2012 adjusted EPS of $4.40-$4.60, well ahead of Wall Street's $4.20 estimate. "In many ways, our achievements during 2011 transformed the Company and positioned us well for the future," CEO Alec Cunningham said. However, with the stock now up about 100% over the past year, much of that optimism might be baked well into the price. �

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