WellPoint ( WLP) has received a second, more favorable opinion of its 2006 guidance. True, the company simply reiterated its outlook -- rather than raising it to meet lofty Wall Street expectations -- during its much-awaited investor day this week. But the company has a reputation for beating its own targets, so some experts on Wednesday chose to leave their own, more bullish views intact. "Since we are paid to produce our best estimates and not simply repeat management statements, we will ignore this guidance," declared Prudential analyst David Shove. "We continue to believe that the synergies from the Anthem deal and the profitability of (Medicare) Part D will drive earnings to $4.80 in 2006. We reiterate our overweight rating for the shares." Several other analysts viewed WellPoint's 2006 forecast, calling for operating profits of $4.69 a share, as conservative as well. Patrick Hojlo of Credit Suisse First Boston pointed to history as a guide. Last year, he noted, WellPoint projected higher costs -- and ultimately, lower earnings -- than have materialized. Now, he suggests, the company seems even better positioned to capitalize on favorable industry trends and deliver additional upside going forward. In the meantime, however, shares of WellPoint have taken a slight hit. The stock, which was trading near an all-time high ahead of this week's update, slipped 1.7% to $77.71 Wednesday. But Hojlo wasn't necessarily surprised. "When your stock is up 38% year-to-date -- and 120% over the past two years -- expectations can be hard to beat," he wrote on Tuesday. "The market may have wanted a little more from WLP today in the way of guidance. But ... (because of) our belief that the company will grow operating profit faster than the market currently expects -- 12% to 15% -- over the next three to five years, we are still confident buyers of the stock."
WellPoint is "taking the aggressive step of no longer allowing non-risk customers to carve out the pharmacy benefit," he explains. "In WLP's opinion -- one increasingly shared by employers -- there is meaningful value in having an integrated medical and pharmacy benefit." Such a shift could hurt major stand-alone PBMs such as Medco ( MHS) and Caremark ( CMX) that manage pharmacy benefits for health plans but have come under attack for allegedly saving their clients less money than they should.