Bank of America Reiterates Buy on Coventry Health Care, Raises PT to $42

Bank of America reiterated its Buy rating on Coventry Health Care CVH. At the same time, Bank of America raised its price target from $41 to $42. In a research report published today, Bank of America stressed a rate increase in Missouri as a reason for its decision. In the report, Bank of America states, "Missouri is implementing a rate increase effective July 1, 2011 for its annual reimbursement update, based on our discussions with industry officials (see Charts 1-3). A 5.5% boost is worth $0.06 to 2011 EPS ($0.12 annualized) versus 0% assumed in guidance. We are raising our 2011/12/13 estimates to $2.91/$3.24/$3.48 from $2.85/$3.12/$3.36 and raising our PO to $42 from $41. We continue to see upside to our estimates/guidance on conservative operating assumptions. Meanwhile, there should be further upside to numbers as CVH deploys its cash hoard (over 20% of market cap deployable in 2011)." On Thursday, Coventry Health Care closed at $34.12.