Another Healthy Quarter for WellPoint - TheStreet



has closed its book on a very healthy year.

The California-based health maintenance organization ended 2002 with a strong fourth quarter that saw profits surge 64% from a year earlier. Quarterly earnings per share of $1.18 came in at the high end of analyst expectations, topping the consensus estimate by 2.3%.

WellPoint -- which boasts the largest for-profit health plan in its home state -- has now beaten Wall Street expectations for at least five quarters in a row. In sharing the company's latest results, CFO David Colby declared 2002 "an outstanding year for WellPoint in almost every operating metric."

Colby highlighted the following as major accomplishments for the year:

  • A 70% jump in annual net income.
  • Better-than-expected membership growth.
  • A notable decline in general and administrative expenses.
  • Premium pricing that continues to sufficiently cover medical cost trends.

For the full year, WellPoint reported net income of $703.1 million, or $4.67 per share. Excluding extraordinary gains, the company posted 2002 earnings of $4.42 a share -- or 3 cents above the mean estimate of analysts polled by Thompson Financial/First Call. Full-year revenue leapt 40% to $17.3 billion.

Like Colby, WellPoint CEO Leonard Schaeffer applauded the company's recent performance.

"Our strong membership growth in the fourth quarter and full year means that we are delivering products and services our customers want," Schaeffer said.

During 2002, membership in WellPoint's medical plans swelled 26% to 13.2 million. WellPoint attributed that growth to three 2002 acquisitions -- Blue Cross and Blue Shield of Missouri, HealthLink and MethodistCare -- as well as continued growth in key areas like California and Georgia.

WellPoint is best known as the first Blue Cross and Blue Shield health plan to become "for-profit" and currently ranks as the largest publicly traded Blue Cross health plan in the nation.

WellPoint's stock, which was up in after-hours trading, has lost roughly 23% of its value since peaking at $83.20 last October. Investors began selling off the stock, as well as other managed-care giants, over concerns that the companies in the sector would see their phenomenal growth slow.

Analysts expect to see WellPoint's earnings growth drop dramatically in coming years. Current forecasts show that growth rate slipping from 39% to 16% this year alone. Nevertheless, most analysts continue to highly recommend the stock and set price targets -- ranging from $87 to $110 -- that are well above the stock's recent trading range.