After passage of the healthcare reform bill in the U.S. House of Representatives last night, health insurers stocks have diverged sharply in pre-market trading, with Aetna (AET) up 71 cents, or 2%, at $35.17, and Cigna (CI) up 97 cents, or 2.6%, at $38.05, and just about everyone else trading down or only up slightly: UnitedHealth Group (UNH) is up 1 penny at $34.40, Humana (HUM) is down 40 cents, or 0.8%, at $49.60, HealthSpring (HS) is unchanged at $18.65, HealthNet (HNT) is unchanged at $26.15.
One of the first upgrades to come down the pike today is an upgrade to “Buy” at Collins Stewart on the shares of $1.6 billion Amerigroup (AGP), a managed care firm covering 1.8 million people, primarily those in Medicaid and Medicare, in 11 states, including Texas, Georgia, Florida, and New York.
Analyst Brian Wright this morning says Amerigroup will be a primary beneficiary of the expected 30% expansion of Medicaid after the reform bill takes full effect starting in 2014. The shares have run-up recently from $25 to $31 and change, but Wright says it’s still cheap, trading at 12 times his 2011 EPS estimate of $2.60.
Wright thinks the stock should trade at 15 times or more his 2011 estimate, or $39, writing “We note that given the outlook for robust growth for the next 5 years, we could see Medicaid plan multiples approach prior peaks (20x range.).”
Amerigroup shares are up 67 cents, or 2%, at $32.06.
