Oppenheimer analysts are bullish on Nuance Communications Inc. (NASDAQ:NUAN) and Centene Corp (NYSE:CNC) as one company shifts towards a SaaS business model and the other company won several health care contracts starting in 2017, respectively.
Nuance Communications Inc.
Oppenheimer analyst Shaul Eyal is bullish on Nuance Communications and reiterates an Outperform rating with a price target of $26. Yesterday, Nuance reported first quarter fiscal 2016 results, posting revenues of $494.4 million, exceeding the street’s estimate of $492 million and marking a 1.2% YoY increase. The company posted non-GAAP EPS of $0.36, which beat the Street’s estimates of $0.33. Additionally, Nuances operating margins of 28.6% beat the Street’s estimates of 26.6%.
Part of the success, Eyal writes, can be attributed to solid operating cash flow generation of $141.1M, up 48% YoY. He continues, “Management remains on track toward its FY2017 goal of cutting $125M in costs.” Overall the transformation process towards a SaaS business model is “showing positive indications” highlighted by improved margins and booking levels.” Additionally, Nuance’s “exposure to mission-critical end markets” like healthcare (50%) can position the company as a more “defensive technology play.”
Eyal believes that Nuance is “the de facto standard” in healthcare transcriptions. He concludes, “The speech market remains relatively under-penetrated, providing significant opportunity to expand market reach.” Nuance has the opportunity to benefit as a market leading company for speech solutions and the company has “set the bar high” following another strong earnings performance.
According to TipRanks, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Eyal has a yearly average return of 5.7% and a 50% success rate. Eyal is ranked #215 out of 3656 analysts.
Following yesterday’s earnings release, Oppenheimer analyst Michael Wiederhorn weighed in on Centene Corp. The analyst maintains an Outperform rating on the stock with a price target of $89. Centene reported 4Q15 adjusted EPS of $0.95 which beat estimates of $0.83. The strong performance, according to Wiederhorn, was driven by a strong HBR (Health Benefit Ratio) of 88%, slightly offset by a higher G&A (General and Administrative) expense ratio of 8.7%. Wiederhorn continues, with the delay of closing HNT pushed to March 1, Centene tweaked its full year 2016 adjusted EPS guidance to $4.05-4.40 vs. its original guidance of $4.10-4.40.
Centene recently won a contract serving 230K Medicaid/CHIP enrollees in Nebraska, in addition to two other plans starting in 2017. The company also won a Centurion contract in Florida which starts Q2 of 2016. According to Wiederhorn, he “anticipates Medicaid expansion in Louisiana (+250K across five plans) on July 1, 2016 (excluded from guidance).”
Despite the delay on the HNT deal and tweaked guidance, the analyst remains optimistic as believes investors should be “opportunistic around any weakness due to process, as we expect the transaction to close in the near future.”
According to TipRanks, analyst Wiederhorn has a yearly average return of 62% and a 17.1% success rate. Wiederhorn is ranked #2 out of 3656 analysts.