Wells Fargo Securities analyst Peter Costa upgraded Triple-S Management Corp. to "market perform" from "underperform," writing that the company's current valuation fairly reflects the weak economy of Puerto Rico, where its business is focused.
On the other hand, Costa wrote, Triple-S appears to have moved past most of the reserving issues that befell the company in 2016, while its Medicare and Medicaid businesses could take advantage of better rates heading into 2018.
Despite continued challenges in the second half of 2017, the company's Medicare Advantage business is positioned to improve next year on the expectation of higher-quality star ratings and new efforts by management to drive profitability, the analyst said.
Puerto Rico's weak economy could still weigh on the company's growth prospects, Costa noted, though Zika-related risks on the island are becoming "more manageable" than previously expected.
The analyst raised his full-year 2017 EPS estimate to 86 cents and increased his full-year 2018 and 2019 EPS estimates to $1.70 and $2.00, respectively. He raised his target price for the stock to $20 from $16.