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Barclays initiates coverage of 3 diversified managed care organizations

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Barclays initiates coverage of 3 diversified managed care organizations

Barclays analyst Steve Valiquette has started coverage of three diversified managed care organizations — Anthem Inc., Cigna Corp. and UnitedHealth Group Inc. — with "overweight" ratings, writing that he sees managed care as a key industry selection in a rising-interest-rate environment.

He told investors in a March 7 research note that the three companies are poised to leverage favorable secular trends in terms of pricing, margins, corporate tax reductions and rising U.S. interest rates.

Valiquette views Anthem as well-positioned for commercial and government membership momentum. He noted that the company has largely executed under CEO Joe Swedish, experiencing continued success in key product areas such as national and group markets within its commercial health plan operations. He said the individual exchange markets have been a disappointment but pointed out that the company is reducing its exchange exposure.

Valiquette said Cigna is poised for EPS growth re-acceleration over the next few years and to capture market share in both the government and commercial segments. He also noted the "robust" growth of the company's non-healthcare product lines, which further de-risks the company for the near term.

On UnitedHealth, Valiquette said the company is on track to continue its goal of 13% to 16% EPS growth because of leverage from Optum and the favorable position of its Medicare franchise.

He set price targets of $270 for Anthem, $235 for Cigna and $265 for UnitedHealth. His EPS estimates for 2018 are $15.10 for Anthem, $12.90 for Cigna and $12.54 for UnitedHealth. His EPS estimates for 2019 are $16.84 for Anthem, $14.35 for Cigna and $14.30 for UnitedHealth.