WellPoint Inc. (WLP), at its investor conference provided its guidance for full year 2011. The company reaffirmed its expectation of delivering net income of least $6.30 per share. The Zacks Consensus Estimates for 2011 is in line with the company’s guidance. The company also expects to achieve earnings per share growth of at least 10% over a longer term.
WellPoint expects operating revenue to be $59.5 million in 2011, up 3% year over year. The company also expects Medical enrollment growth in the National, State Sponsored, Senior and Federal Employee Plan businesses, partially offset by attrition in Local Group and Individual.
Selling, General and Administrative (SG&A) expenses are likely to decrease $400 million or 4.5%, and the SG&A Expense Ratio is projected to be 14.2%, a decrease of 110 basis points over the prior year. WellPoint estimates the benefit expense ratio to likely increase by 170 basis points to 84.9% in 2011
WellPoint expects to generate cash flow from operations of $2.6 billion in 2011.
Additionally, the board of directors of WellPoint Inc. approved an increase in share buyback authorization to $1.6 billion for 2011. The company will utilize this authorization by 2011 end. During 2010, the company bought back 76.7 million shares of its stock for approximately $4.4 billion.
The board of directors also declared first quarter 2011 dividend of 25 cents per share, representing an annualized dividend of $1.00per share. The dividend will be paid to shareholders of record as of March 10, 2011on March 25, 2011.
The dividend represents an yield of 1.5%, higher than that of industry average of 1.11%. The company’s dividend yield also exceeds that of its nearest peers, Cigna Corp.’s (CI) yield of 0.09% and Unitedhealth Group’s (UNH) yield of 1.17%.
WellPoint Inc. reported its fourth-quarter income from continuing operations of $1.33 per share, surpassing the Zacks Consensus Estimate of $1.21and $1.16 in the year-ago quarter. Fiscal 2010 earnings were $6.74 per share, surpassing the Zacks Consensus Estimate of $6.60 and $6.09 earned in 2009.
The improvement was attributable to higher operating cash flows and the implementation of organizational changes in the health care. The sale of NextRx pharmacy benefit management subsidiaries to Express Scripts (ESRX) in the fourth quarter of 2009 also contributed a significant return of capital.
The Zacks Consensus Estimate for first-quarter 2011 is $1.89 per share. For full year 2012, the Zacks Consensus Estimates is $7.31 per share.
We maintain our long-term Neutral recommendation on WellPoint. The quantitative Zacks #3 Rank (short-term Hold rating) for the company indicates no clear directional pressure on the stock over the near term.
Based in Indianapolis, Indiana and formed in November 2004 through the merger of Anthem Inc. and WellPoint Health Networks Inc., WellPoint Inc. is the largest publicly traded managed care organization in terms of membership.
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