WellPoint Inc. (WLP) is the largest publicly traded commercial health benefits company, and the largest of the Blue Cross Blue Shield (BCBS) plan providers, in terms of membership in the U.S.? The company reported 3Q08 net income of $820.7M (down 5.4% y/y), or EPS of $1.58, compared with net income and EPS of $868M and $1.44, respectively, in 3Q07.

Despite a challenging environment, WellPoint has managed to reduce its health benefit ratio on a sequential basis and report a modest increase in enrollments. We have lowered our price target to reflect management's lowered guidance, but maintain a Buy at current levels.

We have valued WLP on a forward price/earnings (P/E) basis, as well as a comparison to similar firms in the managed care sector. Our $58 price target is derived using a P/E multiple of 10.6x our FY08 EPS of $5.49.