Deutsche Bank Has Hold Rating On WellCare Health Plans Following Earnings (WCG)

Deutsche Bank has a Hold rating and a $41 price target on shares of WellCare Health Plans WCG following the company's earnings report. In a note to investors, Deutsche Bank writes, "WCG wrapped up an excellent 1Q11 managed care earnings seasons this morning by reporting 1Q11 ops EPS of $0.66, which was 310% ahead of the Street's $0.16 (DB at $0.17). Operating EPS increased by 280% from 1Q10. GAAP EPS was $0.50 including $10.7m pre-tax ($0.16) of costs related to the government investigations and litigation. Revenues at $1.475B were exactly in line with our model, with the entire 284% EPS beat relative to our $0.17 forecast coming from lower MLR and SG&A ratios, as well as a lower tax rate. The consolidated MLR at 85.7% was 190 bps lower than our 87.6% est., although the PDP MLR at 100.9% was above our 98.0% est. The lower MLR was driven by significant improvement in the Medicaid MLR along with continued favorable medical margin results in Medicare Advantage (MA). The MA was only 78.1% in 1Q11 compared to our 81.4% forecast, while the Medicaid MLR came in at 84.1%, well below our 87.2% estimate. Adjusted SG&A was 40 bps lower than our est. at 10.9%. The tax rate at 38.4% was 100 bps lower than our est." Shares of WCG are soaring today, gaining $3.69 to $46.12, a gain of 8.7%.