Magellan Health Hits 52-Week High; Focused on Boosting Services - Analyst Blog

On Jun 12, 2014, Magellan Health Inc. MGLN scaled a new 52-week high of $62.17. The company's shares have been riding high, mainly driven by its strong first-quarter 2014 earnings, product launches and adoption of inorganic growth strategies.

Magellan Health's first-quarter earnings of 92 cents per share surpassed the Zacks Consensus Estimate by 21.05%. Although earnings declined from the year-ago quarter, this healthcare services provider had previously delivered positive earnings surprises in 3 of the last four quarters with an average beat of 21.56%.

Following Magellan Health's earnings release on Apr 29, 2014, its shares gained 7.9% to close at $62.05 in the last trading session. The year-to-date return from the stock was 3.56%, above Nasdaq's return of 2.89%.

Magellan Health has been prudent in its investments, whether it was regarding mergers, acquisitions, product launches or the upgrade of its products and services. Over the past one year, the company made significant alliances to enhance its service offerings. These include collaboration with AlphaCare of New York in Aug 2013 and Rethink Autism, Inc. in Sep 2013. Additionally, the company received a notice of contract from the State of Florida in Sep 2013 to launch a Medicaid specialty health care plan. The company also acquired Partners Rx® in Oct 2013 to enhance its Pharmacy Benefits Management PBM capacities. Moreover, the acquisition of CDMI will expectedly help the company generate tax benefit that will be recognized over 15 years. This transaction is also expected to be accretive to full-year 2014 earnings.

Apart from these, Magellan Health has been focused on launching better products to strengthen its portfolio. NIA, a subsidiary of Magellan Health, rolled out a clinical decision support application in Nov 2013 for emergency department physicians, a new website for consumers to access information about products and services in Feb 2014 and launched an Audit tool – MRxAudit – in Mar 2014 to determine the efficiency of its PBM business. NIA also introduced an animated website, RadZone Kids, to help parents prepare their children for diagnostic imaging tests. All these are expected to help the company attract more customers and thereby generate higher revenues.

Currently, Magellan Health carries a Zacks Rank #4 (Sell). However, better-ranked players in the same industry include Select Medical holdings Corporation SEM, WellCare health Plans, Inc. WCG and Centene Corp. CNC. While Select Medical and WellCare sport a Zacks Rank #1 (Strong Buy), Centene has a Zacks Rank #2 (Buy).