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Coventry Rises Most in 3 Years After Profit Beats Estimates

Coventry Health Care Inc. surged the most in three years 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 11 percent to $34.07 at 4:09 p.m. in New York, the biggest increase since July 28, 2009. The shares have fallen less than 1 percent in the 12 months.

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., 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.

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