INDIANAPOLIS (AP) — Shares of insurer HealthSpring Inc. stumbled Wednesday, a day after the health insurer said its second-quarter net income climbed 50 percent and it raised its annual earnings forecast.
THE SPARK: The Nashville, Tenn., company said Tuesday that its earnings grew to $83.9 million, or $1.23 per share, from $55.8 million, or 98 cents per share in last year's quarter. Revenue climbed 80 percent to $1.38 billion following HealthSpring's acquisition last November of Medicare Advantage plan operator Bravo Health.
Analysts expected a profit of 95 cents per share on $1.37 billion in revenue, according to estimates compiled by FactSet.
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HealthSpring also said it now expects an annual profit of $3.95 to $4.20 per share. That's up from its previous forecast of for earnings of $3.40 to $3.70 per share for the year.
Analysts had expected the company to earn $3.74 per share.
THE BIG PICTURE: Several health insurers have reported strong second quarters the past few weeks, driven at least in part by health care use that has grown more slowly than insurers expected when they set prices. This trend has helped insurer performances for the past few quarters.
But sector stocks also have wobbled the past several days, with some of the biggest names like UnitedHealth Group and WellPoint Inc. falling.
THE ANALYSIS: HealthSpring delivered strong results in the quarter, helped by historically low trends for in-patient care use and improvements in its Medicare Part D prescription drug coverage business, Raymond James analyst Michael Baker said in a research note.
The insurer delivered a "stellar" quarter, but its shares fell in Tuesday trading, possibly because investors overlooked company fundamentals and worried about the possibility of more Medicare and Medicare Advantage funding cuts coming from deficit reduction plans in Washington, Jefferies analyst David Windley said in a separate note. He thinks those fears are overblown.
"We still like (HealthSpring), but we don't know when the market will begin to act rationally," Windley wrote.
SHARE ACTION: Down 3.5 percent, or $1.29, to $36 in afternoon trading.
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