WellPoint Inc. (WLP:US)’s board, reacting to criticism after the health insurer cut its profit forecast, said the management team led by Chief Executive Officer Angela Braly has its full support.
WellPoint, the second-largest U.S. health plan, yesterday said net income this year will be $7.30 to $7.40 a share, cutting its June 15 forecast because of higher costs and lower enrollment. The shares fell 12 percent yesterday in the biggest single-day drop since March 2008, and today lost another 1.2 percent to close at $53.39.
Braly earlier this year announced the Indianapolis-based company would abandon markets for senior citizen plans in California that caused losses. On July 9, WellPoint said it would pay $4.9 billion for Amerigroup Corp. (AGP:US), which specializes in government-backed Medicaid plans, and agreed last month to pay $900 million for eyewear retailer 1-800 Contacts.
“The Board has been fully involved in the strategy WellPoint is pursuing and is supportive of the strategy and our management team,” lead director Jacquelyn Ward said in an e- mailed statement yesterday.
WellPoint’s second-quarter earnings excluding one-time items missed analysts’ estimates by 4 cents a share yesterday as membership in medical plans fell 2.3 percent to 33.5 million.
BMO Capital Markets’ Dave Shove downgraded the stock today to Market Perform in a note to investors. The company is “stuck in reverse,” he wrote. Shove lowered his target price to $59 from $80, according to the note.
WellPoint is “snatching defeat from the jaws of victory,” wrote Bernstein Research’s Ana Gupte. She lowered her target price for the stock to $72 from $79.
The missteps mean “time may be running out” for the insurer’s management team, said Carl McDonald, a Citigroup analyst in New York, in a note to clients yesterday. “Several large holders were already frustrated.”
The earnings report and the forecast came a week after UnitedHealth Group Inc. (UNH:US), the biggest health plan, raised its forecast after increasing its member rolls.
The WellPoint results “put an exclamation point on the differences between United and WellPoint,” McDonald wrote in his note.
Braly, during a conference call with analysts yesterday, said the company was “disappointed with the need to lower our guidance, but believe it’s the right action to take, given the challenging marketplace we see” and WellPoint’s need to invest.
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