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WellCare Stock Up After Error Adjustment

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By JEROME R. STOCKFISCH

The Tampa Tribune

Published: July 23, 2008

TAMPA - Shares of WellCare Health Plans jumped Tuesday, a day after the company said it was restating more than three years worth of financial statements because of accounting errors.

The shares closed at $36.25, up $7.02, or 24 percent from Monday's close of $29.23, after reaching as high as $38.97. Carl McDonald, who follows the company for Oppenheimer & Co. in New York, said in a research note that the company's travails "are nowhere near as severe as the market previously believed."

WellCare said late Monday that it would restate earnings for fiscal 2004, 2005, 2006 and the first six months of 2007 after discovering it had understated refunds it owed state governments by $49 million.

WellCare manages benefits for Medicare and Medicaid recipients in several states. The company's Henderson Road headquarters was raided by federal agents in October 2007. The U.S. Attorney's Office has not explained the raid or what information agents were seeking. At that time, the stock was trading in the $120 range.

The company has since turned over all of its top management and formed a special investigative committee, whose work led to the restatements.

In his research note, McDonald noted that WellCare would revise its earnings per share downward by "just" 14 percent in 2004, 9 percent in 2005, 9 percent in 2006 and 5 percent for the first half of 2007.

"Negative earnings revisions are almost never a good thing, but in this case, it feels like the market has more than adequately punished WellCare," McDonald said.

Reporter Jerome R. Stockfisch can be reached at (813) 259-8402 or jstockfisch@tampatrib.com.

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