Health Net Hits 52-Week High on Favorable Developments - Analyst Blog

On Dec 12, 2014, shares of Health Net, Inc. (HNT) scaled a new 52-week high of $52.56 supported by a slew of positives.

Last month, the company inked a seven-year master services contract with a wholly owned subsidiary of Cognizant Technology Solutions Corp. (CTSH). This deal will likely generate $150 million to $200 million in general and administrative and depreciation expense savings annually by 2017. Moreover, this deal is expected to strengthen the product development and service capabilities of Health Net thereby lending the company a competitive edge over its peers.

Moreover, this month, Health Net of Arizona, Inc., a subsidiary of the company, signed an agreement with Banner Health Network to enhance health care for its Medicare Advantage (MA) members. Health Net MA beneficiaries will be able to access Banner Health Network's health system that will deliver high quality and coordinated patient care in the Maricopa and Pinal counties.

Apart from enhancing health care for Health Net's MA members, the latest agreement strengthens the existing relationship of the company with Banner Health Network. The relentless focus on providing enhanced health care is expected to draw in more number of members for Health Net, thereby making way for more revenue generation.

Earlier, the company released its third-quarter earnings, whereby management provided an enhanced membership guidance which also prompted an increase in the revenue guidance. Additionally, the company returned $69 million in the form of share repurchases to its shareholders. The financial position of Health Net also remained strong at the end of the last reported quarter. This should help the company come up with more capital deployments and inorganic growth activities going ahead.

Moreover, Health Net's one-year return of 80.76% was higher than that of S&P 500's return of 12.78% and that of other industry players like UnitedHealth Group Inc. (UNH) and Humana Inc. (HUM) that recorded returns of 40.11% and 43.78%, respectively.

Health Net presently carries a Zacks Rank #3 (Hold).