NEW YORK (AP) — A Barclays analyst said Thursday he is expecting a strong year for those health insurers that do a lot of business with Medicare, and upgraded shares of HealthSpring Inc. and Humana Inc.
Joshua Raskin maintained a “Positive” view on the health insurance industry, saying investors will pay more attention to the state of their business this year and less to the details of the debate over health care reform, which may be passed relatively soon. Raskin said that change in focus will help the stocks because the insurers may do better than investors expect.
“2010 will likely bring a period of calm during the storm as legislation is passed but not yet implemented,” he wrote in a note to investors. He expects strong Medicare results this year, and noted that HealthSpring and Humana get a bigger portion of their profits and revenue from Medicare business than any other publicly traded managed care company.
He also said the U.S. Department of Defense may extend a contract with Humana for a longer-than-expected term. HealthSpring is focused on reducing its costs and has performed well over the last few quarters, he added.
Raskin upgraded HealthSpring shares to “Overweight” from “Equal Weight” and raised his price target to $24 per share from $18. He raised his rating on Humana stock to “Equal Weight” from “Underweight,” and lifted his price target to $53 per share from $36. He also increased his 2010 profit estimates for both companies.
In total, Raskin raised his price targets on 14 health insurers, including Aetna Inc., Cigna Corp., UnitedHealth Group Inc., WellCare Health Plans Inc., and WellPoint Inc.
Shares of Humana, based in Louisville, Ky., closed at $45.98 on Wednesday, not far from their 52-week high of $46.34. Shares of Nashville, Tenn.-based HealthSpring finished at $17.04.