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 CorpCNC
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.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 IncAET
and
Humana IncHUM
. "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.
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Posted In: Analyst ColorUpgradesAnalyst RatingsUBS
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