Amerigroup Corporation (AGP) has surprised on the Zacks Consensus 2 out of the last 4 quarters by an average of 51.8%. AGP has attractive valuations, with a price-to-book ratio of just 1.7.
Company Description
Amerigroup provides healthcare access to the financially vulnerable, seniors and people with disabilities by developing multi-state managed health services for the public sector.
The company services 1.8 million people in Florida, Georgia, Maryland, New Jersey, New Mexico, New York, Ohio, South Carolina, Tennessee, Texas and Virginia.
2010 and 2011 Zacks Consensus Estimates Rise
Despite the uncertainty in the health care sector over the federal health care reform legislation and its affects on Medicare Advantage programs and at the state level over rates for Medicaid, analysts are still pretty bullish on Amerigroup in 2010.
The full year Zacks Consensus Estimate climbed 11 cents to $2.22 per share in the last 30 days with 6 estimates moving higher in that time.
Higher earnings are also expected in 2011 as the Zacks Consensus rose 15 cents to $2.60 per share in the prior month with 3 estimates moving higher.
For the first quarter, 2 estimates have moved higher in the past 30 days as the Zacks Consensus has moved to 40 cents from 38 cents in that time period.
We’ll have to wait and see if any analysts revise estimates due to the recent passage of the health care bill.
Additionally, Amerigroup stopped providing full year guidance in October 2009 due to uncertainty on medical cost trends and the need for additional insight on state premium rate actions. The company is scheduled to report first year earnings on Apr 23.
Amerigroup Beat Big in the Fourth Quarter
On Feb 19, Amerigroup reported fourth quarter results that surprised on the Zacks Consensus by 203.85%. Earnings per share were 79 cents compared to the Consensus of 26 cents. The company made 67 cents in the fourth quarter of 2008.
Membership increased 13.2% for the full year to 1.8 million and grew 0.6% in the fourth quarter. This was boosted by a jump in Medicaid eligibility in most states due to the recession.
Revenue for the fourth quarter jumped 18.5% to $1.4 billion compared to the year ago period. Medical costs, however, rose due to higher outpatient costs and the H1N1 flu virus, which emerged in the off-season. However, H1N1 costs started to abate by the end of quarter.
Premium revenue increased 19.3% in the quarter compared to the year ago quarter. This was impacted by rate increases in Tennessee and Georgia. The rate increase in Tennessee was granted in December but was retroactive to July 1, 2009. Amerigroup recognized about $12.6 million of revenue in the fourth quarter due to that increase.
Value Fundamentals
Amerigroup is a Zacks #1 Rank (strong buy) stock. It has a forward P/E of 14.9 which makes it an attractive value stock at under 15x earnings. The company also has a solid average 5-year return on equity of 12.7%.
Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor in charge of the market-beating Zacks Value Trader service.
