Wells Fargo Initiating Coverage On HealthSpring

Wells Fargo is out with a research report on HealthSpring, Inc.

and is initiating coverage with an Outperform rating and a $53-$57 price target on shares. In a note to clients, Wells Fargo writes, "We are initiating coverage of HealthSpring with an Outperform rating. HealthSpring is focused on Medicare Advantage, which continues to be our favorite sector due to its strong growth potential and managed care's relatively low penetration rate. HealthSpring has strong physician engagement tools that should allow it to achieve higher quality ratings (and therefore higher payments) as well as lower costs. We believe the Bravo Health transaction should provide a base from which HealthSpring can grow using its established methods of physician engagement and cost control. We estimate 2011 EPS at $4.20 and 2012 EPS at $4.40. Our valuation range of $53-57 is based on a P/E multiple of 12-13x our 2012 EPS estimate." Shares of HS closed at $35.97 yesterday.