Bank of America Merrill Lynch Reaffirms “Underperform” Rating on WellPoint (WLP)
On Wednesday analysts at Bank of America Merrill Lynch reported that they remain cautious on health care benefits company WellPoint, Inc. (WLP) despite some signs of positive numbers in 2013.
The analysts reiterated its “Underpeform” rating on WLP and value shares at $63. That valuation is a +3.2% upside to Monday’s closing price of $61.07.
Bank of America Merrill Lynch noted, “Today, WLP closed its previously announced acquisition of AGP. With this deal we are raising our 2013/14 estimates to $7.97/$8.86 from $7.85/$8.38 but despite what we see as numerous LT positives from the deal, we remain cautious on the name. HC Reform includes many provisions that will be serious earnings headwinds as we approach 2014 including the effect of the exchanges on the Commercial business, minimum MLR in Medicare Advantage, and the industry fee. While the impacts of these provisions have been scrutinized for the past few years, the range of potential outcomes is quite wide with a downside scenario more likely than an upside scenario, in our opinion. This uncertainty is likely to leave the group range bound, trading at 7-9x earnings. WLP has the most exposure to 2014 uncertainty and despite a good acquisition, it appears unlikely to show significant upside in 2013, so we remain Underperform.”
WellPoint shares were up 25 cents, or +0.40%, during morning trading on Wednesday. The stock is down -7.52% year-to-date.
The Bottom Line
Shares of WellPoint (WLP) have a 1.88% dividend yield, based on Monday’s closing stock price of $61.07. The stock has technical support in the $56-$57 price area. If the shares can firm up, we see overhead resistance around the $63-$65 price levels.
WellPoint, Inc. (WLP) is not recommended at this time, holding a Dividend.com DARS™ Rating of 3.2 out of 5 stars.
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