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UBS Has Had Enough: Centene Upgraded To Buy On 'Underappreciated Opportunities'

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In a report published Monday, UBS analyst A. J. Rice upgraded the rating on Centene Corp (NYSE: CNC) from Neutral to Buy, while maintaining the price target at $80.

Centene's shares have declined 15 percent since the company announced plans to acquire Health Net, Inc. (NYSE: HNT) on July 3.

"At this point, we believe takeover speculation has been taken out of CNC shares, and there has been turnover in shareholder base since Centene has moved from being a pure-play Medicaid name to a broader managed care play still largely focused on the fast growing government segments," analyst Rice said.

In the report UBS noted that Centene continued to have a conservative balance sheet with a 40 percent D/C ratio expected post-closing and a mid-30 percent D/C targeted by late 2016 or early 2017. The report pointing out that the balance sheet strength "should allow CNC to consider buying divestitures that might result from the two larger pending MCO deals."

Centene has already expressed interest in acquiring units that may be divested following the transaction between Aetna Inc (NYSE: AET) and Humana Inc (NYSE: HUM). "We estimate 120-210K individual MA lives could be up for grabs in CNC's existing states, which will translate to a $1.4-$2.4 bln revenue opportunity," Rice added.

Other strengths that could boost Centene's future performance include its strong pipeline with many new contracts expected in the near future.

Latest Ratings for CNC

Oct 2016Credit SuisseMaintainsOutperform
Sep 2016Evercore ISI GroupInitiates Coverage onBuy
Sep 2016Leerink SwannDowngradesOutperformMarket Perform

View More Analyst Ratings for CNC
View the Latest Analyst Ratings

Posted-In: UBSAnalyst Color Upgrades Analyst Ratings


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