Out of the Gate: Amerigroup shares rally on upgrade to 'Buy'

NEW YORK—Shares of health insurer Amerigroup Corp. rose in morning trading Tuesday, after an analyst upgraded the stock, citing improvements in several markets and lower expected expenses for flu and upper respiratory illnesses.

Shares rose $1.56, or 6.4 percent, to $25.92.

Stifel Nicolaus & Co. analyst Thomas Carroll upgraded the Virginia Beach, Va., company's stock to "Buy" from "Hold" and said medical expenses for flu and upper respiratory illnesses, while higher than normal, are within management-expected levels, and should subside.

Also, Carroll said the Ohio market remains challenging, but results should improve as the year continues.

"The Ohio market results year-to-date are within expected operational levels, and should be improving based on results of prior new market expansions," Carroll wrote in a client note.

Markets in Tennessee and Georgia should continue to improve as well, Carroll added.

Carroll's upgrade was also based on a dip in the stock price, which has declined more than 33 percent so far this year. He said the low share price reflected current risks for the stock.