Goldman Sachs Upgrades Aetna, Downgrades Coventry

NEW YORK_A Goldman Sachs analyst upgraded shares of Aetna Inc. Wednesday, saying the health insurer faces little earnings risk in the immediate future, but cut Coventry Health Care Inc. due to its price.

Analyst Matthew Borsch swapped his ratings on Aetna and Coventry, upgrading Aetna to "Neutral" and downgrading Coventry stock to "Sell." He put Coventry on the Americas Sell List, which is a list of stocks carrying negative recommendations, and removed Aetna.

Borsch said there is not much risk that Aetna's profit will fall short of Wall Street expectations because the company has cut its guidance twice in recent months. He added that Aetna has raised prices in most markets in order to even out its profit margins.

"After Cigna, we believe Aetna faces the least downside risk to earnings in the core group from health reform legislation given its limited footprint in Medicare Advantage (relative to Humana, UnitedHealth, Coventry, and Health Net) and its the greater concentration of its business towards large employers (relative to WellPoint)," the analyst wrote.

He raised his price target on Aetna to $28 per share from $23. In midday trading, shares of the Hartford, Conn., company rose 59 cents, or 2 percent, to $30.56. In the past year, Aetna has traded at a high of $44 last September and a low of $14.21 in November.

Regarding Coventry, Borsch said its shares are expensive compared to rivals. Since much of Coventry's recent growth derives from Medicare Advantage plans, the company faces more risk from rising medical costs, according to the analyst. Stock in the Bethesda, Md., company fell 94 cents, or 4.1 percent, to $22.13.

Borsch said shares of Cigna Corp., UnitedHealth Group Inc. and Health Net Inc. could also do well in the second half of 2009.