Triple-S Management Loses Medicaid Business, Stock Tanks (GTS)

Shares of Triple-S Management Corp GTS dropped 15% today after it announced it lost its Medicaid business. Citi analysts seem unfazed, and did not change its price target of $25.00. Citi analysts said, "The bad news is that the Medicaid business accounts for 20% of the company’s health care revenue, and absorbs a lot of fixed costs — We estimate that the SG&A associated with the Medicaid business is about $30 million annually. Every $5 million of stranded SG&A negatively impacts earnings by about $0.14 on an annual basis. We’re cutting our 2010 EPS projection by $0.05 per share (only one quarter of impact), to $2.10, and reducing our 2011 outlook by $0.20 per share, to $2.10. This announcement further solidifies our view that incumbents have very little to gain when an existing contract is out to bid." Citi maintained a Buy rating for Triple-S and a price target of $25.00. Shares of Triple-S are currently trading at $19.23.