HealthSouth climbs on 4Q results and 2013 outlook

NEW YORK -- Shares of HealthSouth Corp. jumped Tuesday after the hospital operator posted strong fourth-quarter results.

THE SPARK: HealthSouth reported its quarterly results Monday, while the market was closed for President's Day. The company said its net income declined, but it saw more patients and received more revenue per patient. HealthSouth said price adjustments by health insurers and Medicare helped its results. It also saw a larger percentage of Medicare patients than it had a year ago, and patients in the most recent quarter had more acute health problems.

The company said its net income slipped 5 percent, to $41.2 million, or 44 cents per share. Revenue grew 7 percent to $552.9 million. Analysts were expecting net income of 32 cents per share and $546 million in revenue, according to FactSet.

HealthSouth said discharges of patients at hospitals open at least a year grew 3 percent. That's an important measurement of hospital performance because it excludes results from facilities that opened or closed within the last year.

THE BIG PICTURE: HealthSouth says it is the largest owner and operator of inpatient rehabilitation facilities in the U.S. The Birmingham, Ala., company runs about 100 inpatient rehabilitation hospitals and more than 20 outpatient facilities in 27 states and Puerto Rico.

HealthSouth said it expects to earn between $1.50 and $1.56 per share in 2103 and said its revenue will be between $2.27 billion and $2.3 billion. The company said the upcoming federal budget sequester would reduce its annual earnings before interest, taxes, depreciation and amortization by about $25 million.

Analysts were forecasting net income of $1.66 per share and $2.24 billion in revenue, on average.

The sequester is a series of $85 billion in automatic budget cuts that is scheduled to go into effect March 1 if federal legislators can't agree on compromise legislation.

HealthSouth said its net income fell 12 percent to $160.3 million, or $1.69 per share, in 2012, and its revenue grew 7 percent to $2.16 billion.

HealthSouth also increased stock repurchase authorization to $350 million from $125 million. Stock repurchases increase companies' profit on a per-share basis because they reduce the number of shares on the market. They can also show that a company's management believes its stock is undervalued.

THE ANALYSIS: Raymond James analyst John Ransom said the results were better than the company suggested they would be in its January guidance. Ransom said HealthSouth did a good job of keeping its costs down and said its growth in 2013 looks good if the effects of the sequester and one-time items are excluded.

"HealthSouth continues to represent an outlier within the services landscape," he wrote.

Ransom rates HealthSouth stock at "Strong Buy."

SHARE ACTION: Shares of HealthSouth rose $2.03, or 9 percent, to $24.50 in afternoon trading. The stock has traded between $18.44 and $24.99 in the last year.

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Humana Shares Fall as 2014 Medicare Rates Cloud Outlook

Ty Wright | Bloomberg | Getty Images The Humana Inc. headquarters office stands in Louisville, Kentucky, U.S.

Health insurer Humana said on Tuesday that the government's proposed 2014 payment rates for Medicare Advantage participants were lower than expected and would affect its profit outlook, sending its shares lower.

Medicare Advantage is the Medicare program in which private insurers provide health insurance to seniors and are reimbursed by the government. Humana has around 2 million members enrolled in Medicare Advantage programs.

On Friday, the government's Centers for Medicare and Medicaid Services issued preliminary base payments rates for this business that implied a mid-single-digit decline in those rates for the company, Humana said.

"Humana is closely analyzing all operational avenues available to address those preliminary rates and the related impact upon the company's ability to grow both its Medicare membership and its earnings for 2014," Humana said in a regulatory filing.

Humana shares were down about 10 percent at $70.50 from a close on Friday of $77.99. Shares in UnitedHealth Group, another large provider of Medicare Advantage plans, were down about 6 percent at $54, from $57.32 on Friday.

UnitedHealth was not immediately available to comment.

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Santarus rises on drug approval and 2013 outlook

NEW YORK -- Shares of Santarus Inc. climbed Tuesday after the company received marketing approval for a new drug and issued a strong sales outlook for 2013.

THE SPARK: The company said Monday that the Food and Drug Administration approved its drug Uceris, which is intended to put symptoms of ulcerative colitis, an inflammatory bowel disease, into remission. Santarus plans to launch the drug in March.

THE BIG PICTURE: The company said it should meet or surpass its previous guidance in 2012, and its revenue outlook for 2013 was better than analysts had expected.

The San Diego company had forecast net income of $12 million to $14 million and $210 million in revenue for 2012. FactSet says analysts had projected net income of $14.2 million, or 20 cents per share, and $209.3 million in revenue.

In 2013 Santarus expects net income of $50 million to $54 million and revenue of $320 million to $325 million. Analysts had expected income of $54 million, or 76 cents per share, and $301.3 million in revenue on average.

Santarus also makes the acid reflux drug Zegerid. It is not currently marketing Zegerid, but is getting ready to resume sales because of a favorable court ruling regarding the patents on the drug.

THE ANALYSIS: Santarus should have a good year in 2013, said Roth Capital Markets analyst Scott Henry, who has a "Buy" rating on the company's shares. He said Uceris was a key drug for the company, and was optimistic about Santarus bringing Zegerid back to market and filing for marketing approval of a new drug.

SHARE ACTION: Santarus stock rose $1.26, or 11 percent, to $12.54 in late afternoon trading. The shares are up more than 80 percent since the end of August and have nearly tripled in value of the last 12 months.

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