WellPoint (NYSE:WLP) Still Trails Peers on Upside

WellPoint (NYSE:WLP) continues to struggle to match up with their peers on the upside, noted UBS, who sees them still improving earnings in 2011, and raised the EPS estimate on them accordingly.

UBS says, "While Q4 was ahead of our expectation ex-items (impairments/tax rate/reserve release) upside continues to trail peers on efficiency/IT investments and CA individual headwind. For 2011, flat EBIT no longer a “stretch goal” and appears extremely achievable as CA improvement + easy SG&A comp should offset much of $300m MLR floor impact. Raise EPS to $6.60 to reflect flat-EBIT assumption coupled w/more optimistic below-line outlook despite mgmt conservatism.

"We est. WLP EPS guidance implies average 2011 share-count that is only 1% below est. YE 2010 levels. Assuming $2B buyback (only 50% of $4B deployable cash) ratably over 2011 we get -$0.19 of upside to guidance of 'at least $6.30.' Investment income decline of 15% or $125m YoY and interest expense of $500m (despite $450m run-rate and $700m of pay-down in Jan.) likely leaves additional $0.15 of cushion, implying more realistic 2011 earnings power of $6.50-$6.75."

UBS maintains a "Buy" rating on WellPoint (WLP), which closed Thursday at $64.36, gaining $1.81, or 2.89 percent. UBS raised their price target on WellPoint from $71 to $73.