WellPoint's perplexing, good day
The stock closed up more than 5% after the company reported that profit dropped 21%. Huh?
That wasn't a typo. Net income declined substantially due to higher SG&A expenses, but still beat analyst expectations significantly.
And those expenses increased because of a strong influx of new members -- 1.3 million, to be exact. So that news actually isn't as bad as it originally sounded.
WellPoint also reported that it was better able to control for its members' medical costs -- the benefit expense ratio (which measures the percentage of premium revenue paid out in medical expenses) declined from 84 percent to 83 percent -- a great sign considering that cost discipline is going to be critical to preserve long term profitability, especially with those blooming SG&A expenses.
So, after Wednesday's rise, and considering all of the uncertainty and regulation swirling around the insurance industry, should investors consider buying today? Michael thinks so.
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