Cantor Fitzgerald Initiates Coverage on Health Care Stocks
Listed below are summaries from Cantor Fitzgerald's initiation of several health care stocks covered by Benzinga today:
Cantor Fitzgerald notes, "Aetna is not expensive relative to its historical valuations or by comparison with its peers, but rising utilization and tough comparisons with prior year periods that included substantial favorable development suggest that earnings growth will slow over the next two years. The company's enrollment is under competitive pressure, and in an environment that is tough for everyone in the group, we do not see this pressure abating. We would like to see Aetna emphasize Medicare more, and we are encouraged by its recent progress with Medicaid mandates, but these initiatives will take time to implement."
Cantor Fitzgerald says, "Although 1Q:12 was marred by $67 million of adverse development, several things could drive better results in 2013, in our opinion, such as lower costs, restructuring, and ramping sales of lower-cost plans. The stock's valuation is not high by historical standards, or in comparison with its peers, but catalysts are not easy to find, and with all the economic headwinds and uncertainty about the managed care outlook in general, we are not inclined to step up to the stock absent some evidence that enrollment is once again trending up."
Cantor Fitzgerald comments, "WellPoint has scale, a national presence and a leading brand name, but it is less diversified and more exposed to the risk market than other national players. We believe the company could be a much more significant Medicare player, and that could be the key to faster earnings growth in the future."
Cantor Fitzgerald comments, "Despite tough comparisons because of large favorable development in 2011, UnitedHealth continues to outperform the industry. Utilization has probably bottomed, but we expect higher loss ratios to be offset by operating efficiency and growth of the services businesses. Enrollment should help, because while we expect commercial to be flat, national accounts should grow as the market consolidates, and the company is well positioned in Medicare and Medicaid, with a national footprint, consumer focus, and a provider-friendly approach to managed care. We expect UnitedHealth's earnings growth to be among the best in the group in 2012 and 2013."
Cantor Fitzgerald notes, "Although its commercial business is relatively weak, Humana's large Medicare book is growing rapidly because of baby boomers aging into Medicare and choosing managed care, and the company's long-term strategy of reinvesting in more cost effective products that preserve the benefits its members find most attractive. This strategy, leveraged by greater consumer engagement, has also fostered better medical management. This has proven a competitive advantage as the government has implemented a program to cut Medicare Advantage reimbursement by 15% over a period of years."
All of Benzinga's Initiation coverage can be viewed here.
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