Goldman Sachs Maintains Sell on Magellan Health After 2012 Guidance Release

Goldman Sachs has published a research report on Magellan Health Services

after the company released initial 2012 guidance. In the report, Goldman Sachs writes, "We remain comfortable with our $3.3bn 2012E revenues, as the two previously announced key contract wins of Blue Shield of California ($130mn) and Louisiana ($125mn-$150mn) will more than offset attrition from 2011. Looking forwards, several RFPs (Virginia, Pennsylvania, Idaho, Massachusetts) provide sufficient opportunity to meet the $150mn in new sales targets for 2012 which have not yet been contracted. However, we remain Sell-rated as margin pressures are broadening, with 4 of 5 business units expected to see YoY margin deterioration in 2012. We don't see a near-term positive inflection in Magellan's margin profile, with margin decline set to largely offset the top-line growth for 2012. We do continue to forecast continued active share repurchases, with $200mn in 2012." Goldman Sachs maintains its Sell rating and $47 price target on Magellan Health Services, which is currently trading up $0.13 from yesterday's $47.37 closing price.