Why Credit Suisse Sees Insurers Gaining More Than Hospitals

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Health care reform is at the top of the to-do list for the current administration and has been a large the source of contention between the two main parties. There have been protests, filibusters and social outrage surrounding this topic, but there is something else to consider as well: how the markets react to the fallout, win, lose or draw. One key analyst took this opportunity to weigh in on stocks that could be most affected by changes in this field.

Credit Suisse raised its price targets for select managed care organizations (MCOs). Given the continued muted health care utilization trends, the firm remains comfortable with its positive stance on diversified MCOs and raised its price targets as follows:

  • Aetna Inc. (NYSE: AET) was raised to $160 from $155.
  • Humana Inc. (NYSE: HUM) was raised to $245 from $235.
  • UnitedHealth Group Inc. (NYSE: UNH) was raised to $195 from $188.

Credit Suisse’s volume survey continues to point to sluggish volumes and deteriorating payer mix, likely somewhat driven by the year-over-year difference in timing of the Good Friday/Easter holiday. The firm believes that the negative payer mix shift observed again in April could put pressure on second-quarter margins for the acute care hospital group to the extent that it continues through the quarter.

Conversely, the firm remains neutral to cautious on Medicaid MCO and hospital stocks. Credit Suisse left its price targets unchanged for these stocks as the result of ongoing pressures on volumes, emerging negative payer mix trends and rising expenses. However, the firm remains relatively constructive on the shares of HCA Healthcare Inc. (NYSE: HCA), based in part on above-average volume and margin performance.

Shares of Aetna were last seen at $145.07 on Wednesday, with a 52-week trading range of $104.59 to $147.48 and with a consensus analyst price target of $149.31.

Humana shares were trading at $231.70. The consensus price target is $234.19 and the 52-week range is $150.00 to $234.88.

UnitedHealth traded at $175.71 a share, in a 52-week range of $132.39 to $178.89. The consensus analyst target is $189.33.

Shares of HCA were trading at $82.06, with a consensus price target of $95.35 and a 52-week range of $67.00 to $91.03.