Bank of America Merrill Lynch Reiterates Underperform Rating, $63 PT on WellPoint
In a report published Wednesday, Bank of America Merrill Lynch reiterated its Underperform rating and $63.00 price target on WellPoint (NYSE: WLP).
BofA Merrill Lynch noted, “Today, WLP closed its previously announced acquisition of AGP. With this deal we are raising our 2013/14 estimates to $7.97/$8.86 from $7.85/$8.38 but despite what we see as numerous LT positives from the deal, we remain cautious on the name. HC Reform includes many provisions that will be serious earnings headwinds as we approach 2014 including the effect of the exchanges on the Commercial business, minimum MLR in Medicare Advantage, and the industry fee. While the impacts of these provisions have been scrutinized for the past few years, the range of potential outcomes is quite wide with a downside scenario more likely than an upside scenario, in our opinion. This uncertainty is likely to leave the group range bound, trading at 7-9x earnings. WLP has the most exposure to 2014 uncertainty and despite a good acquisition, it appears unlikely to show significant upside in 2013, so we remain Underperform.”
WellPoint closed on Monday at $61.07.
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