2/9/2010-Citigroup Equity Research raised its target price on shares of Healthspring Inc (NYSE:HS) to $20 from $19 and raised its EPS estimates, but maintained its Hold rating, citing the company's earnings and guidance.

Citigroup analyst Charles Boorady said, "We raise our 2010 EPS +20c to $2.35 after analyzing 4Q09 results reported this a.m. including first-time 2010 guidance for EPS of $2.25- $2.50, ahead of Street estimates. Our read on guidance is it is a good point estimate, whereas the guidance of peers seems more conservative. Our new estimate assumes higher revenues from Medicare Advantage premium PMPM -2.5% v. previous -4.3%, Part D PMPM +1.5% v. previous +1.0%, and higher fee revenue $53mn v. previous $37.7mn. We model MA MLR +70bps and Part D +250bps y/y, in-line with guidance. We note that HS is highly sensitive to changes in MLR as 100bp change in MA and PDP MLR results in a 27c and 5c swing in EPS, respectively. We introduce our 2010 quarterlies and 2013 EPS; raise our '11-'12 EPS on a similar run rate. New price target $20 (+$1) on same valuation methodology (avg. of 1x TB & 15x '11E EPS)."

Regarding its rating and "near-term risks," Citigroup said, "We maintain our Hold rating on HS as we remain cautious of two near-term catalysts: 1) the potential for a 1-year or multi-year "doc fix" that would be positive (negative) if not financed (if financed) through cuts to MA, and; 2) initial 2011 MA reimbursement rates released by CMS after the market closes on February 19 (the final rate is announced April 5). We note that final MA reimbursement rates will likely be influenced by the timing of a "doc fix."

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