Goldman Sachs Comments On HealthSpring Following Its Investor Day

Following HealthSpring's HS 2011 investor day, Goldman has adjusted its 2011-2013 EPS to reflect the share count dilution from the company's recent share offering. Thereductions to 2012-13 EPS are less than the dilution would imply as it assumes the company will deploy the raised capital in accretive acquisition(s), as was discussed during the presentations. Goldman Sachs lowers its 2011 EPS by $0.20 to $3.70. Goldman lowers its 2012 EPS by $0.13 to $4.35 and 2013 EPS by $0.05 to $4.65. The new EPS implies growth of 18% and 7% for 2012-13. The slower growth for 2013 reflects our view of the drag from lower Medicare Advantage reimbursement. The highlights of the investor day were a discussion of the MA rate outlook for next year following the April 4 final rate announcement by CMS as well as the HealthSpring collaborative care model that involves close partnerships with narrow networks of physician groups. HealthSpring management suggested the medical cost trend environment has remained favorable so far this year. Goldman Sachs has a $46 PT and Neutral rating on HS HS is trading higher at $39.13