WellCare's Net Income Down 33% Over 2011

The 12 percent plunge in the price of WellCare Health Plans shares Friday after the health insurer reported second-quarter earnings was steeper than justified, according to analysts.

WellCare, based in Tampa, Fla., said Friday its net income sank 33 percent compared to last year's second quarter, when the insurer recorded a big gain because of lower-than-expected leftover claims. But WellCare also said its revenue rose 22 percent, and it raised its 2012 earnings forecast.

Its shares sank from a Thursday closing price of $62.38 to $55.12 in Friday trading.

WellCare Health Plans Inc. provides managed care for the government-sponsored health plans of Medicare, which covers the elderly and disabled, and Medicaid, which focuses on the needy and disabled people. Medicare Advantage plans are privately run, subsidized versions of Medicare.

Wedbush analyst Sarah James said in a Monday morning research note the insurer has improved capital levels and a stabilizing mix of Medicare business, among other positives. The analyst also noted that WellCare'sMedicare and Medicaid membership and its contracts in key states for Medicaid expansion are attractive assets for possible acquirers.

She upgraded her rating on the stock to "Outperform" from "Neutral."

Goldman Sachs analyst Matthew Borsch said in a separate note the stock reaction came in part from pressure the insurer saw from its Kentucky Medicaid program, and he noted that WellCare has made progress to improve results. Borsch also said there is some concern about possible inadequate reserve levels, but he saw management's explanation behind its reserve levels as credible.