Coventry Surges After Second-Quarter Profit Beats Estimates

Coventry Health Care Inc. (CVH) rose the most in nine months after beating analysts’ second-quarter earnings estimates because of increased membership in its U.S. government insurance programs and lower costs for its Medicaid business in Kentucky.

Coventry climbed 9 percent to $33.48 at 1:53 p.m. in New York, after reaching $33.99 for its biggest intraday increase since Oct. 24. The shares fell 15 percent in the 12 months through yesterday.

Profit excluding a charge from the loss of a Kansas Medicaid contract fell to 68 cents a share, exceeding the 64 cent average of 17 analysts’ estimates compiled by Bloomberg. Operating revenue rose to $3.52 billion, from $3.03 billion a year earlier, Bethesda, Maryland-based Coventry said in a statement today. Coventry reiterated its 2012 earnings forecast of $3.10 to $3.30 a share.

Earnings were “ahead of expectations on improved performance in Kentucky’s Medicaid program and sequential growth in Medicare membership,” Jason Gurda, an analyst at Leerink Swann & Co. in New York, said in a note to clients today. The company “repurchased 9.3 million shares for $300 million during the second quarter, which was the largest quarter of share repurchase activity in Coventry’s history.”

The results offer comfort to managed care investors who have been “spooked” by rivals, including WellPoint Inc. (WLP), cutting profit forecasts, Ana Gupte, a Sanford C. Bernstein & Co. analyst in New York, said in a note to investors.

Medicare is the U.S. health insurance program for the elderly and disabled, while Medicaid is the government’s health system for the poor.

To contact the reporter on this story: Michelle Fay Cortez in Minneapolis at mcortez@bloomberg.net

To contact the editor responsible for this story: Reg Gale at rgale5@bloomberg.net