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WellPoint Q1 Earnings Boosted by Consumer Business Segment (WLP)

Shares of WellPoint Inc. (NYSE: WLP) rallied on Wednesday after America’s second largest health-benefit provider reported that fiscal first quarter earnings climbed 3.4% as top line growth was bolstered by strong performance from consumer-business division, offsetting weakness in commercial business division.

The Indianapolis-based company also upwardly revised its full-year earnings guidance by 15 cents and is now expecting EPS of at least $7.75. However, it lowered its outlook on full-year operating revenue by $500 million and is expecting it between $71 billion and $73 billion.

Lately, WellPoint, Just like any other healthcare management firm, has been witnessing pressure on its bottom line due to increase in medical costs and drop in membership enrollments.

Accordingly, WellPoint adopted acquisition- led strategy in order to diversify its revenue stream.  Just last year, WellPoint acquired contact lens retailer, 1-800 Contacts Inc. Besides, it also acquired Amerigroup in a deal estimated at $4.46 billion, which made WellPoint as the leading Medicaid insurer, reducing its dependence on individual and small-group based commercial health insurance programs.

For the quarter, WellPoint reported net income of $885.2 million or $2.89 a share compared to a profit of $856.5 million or $2.53 a share, in the year-earlier quarter. Stripping out onetime items such as gains made on investments, charges related to asset impairment, and some other items, non-GAAP earnings came at $2.94 a share up from $2.34 a share. Total operating revenue surged 16% to $17.55 billion.

Analysts’ consensus estimate was for earnings of $2.38 a share on revenue of $18.03 billion, according to a data compiled by Thomson Reuters.

Operating margin contracted 7.8% from 8%, in the same quarter of last year.

While revenue from commercial business segment, which is company’s biggest revenue driver, declined 1.3% to $8.4 billion, revenue from consumer business segment climbed 51% to $7.2 billion.

Medical enrollments climbed 6.3% as of March 31 to 35.8 million but fell 0.9% from the same quarter of last year.

The stock, which was up 14% year-to-date as of Tuesday, was gaining about 5.25% by afternoon trade on Wednesday.



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