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Healthcare Q3 Earnings Releases on Oct 27: AET, HLS & More
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We now have Q3 results from 116 S&P 500 members that combined account for 23.2% of the index’s total market capitalization as per the Earnings Preview article. Total earnings for these companies are up 3.3% from the same period last year on 1.8% higher revenues, with 80.2% beating EPS estimates and 62.9% surpassing top-line expectations.
Healthcare comes under the Medical sector which is one of the seven sectors in the S&P 500 group. So far 11.3% of total Medical sector companies have reported third-quarter results. The sector is expected to deliver 3.7% earnings growth on 7.4% higher revenues in the third quarter. This compares favorably with the projected 0.1% earnings growth on 1.5% increase in revenues for the S&P 500 index.
Healthcare is part of the broader medical sector which includes diversified industries like health maintenance organizations (HMOs) popularly known as health insurers, clinical, laboratories and diagnostics research, medical equipment, hospitals, telehealth services among others.
In the HMO subsector, factors like disappointing public exchange business, increasing medical ratio, and superior government business will majorly affect the earnings of players. Most insurers incurred losses from this business in the first half of the year and the trend is unlikely to reverse this quarter.
Although insurance companies had expected better profitability in 2016 after making meager profits in 2015, the individual exchange business disappointed the firms. Major players incurred losses in this business and are now reducing their participation on exchanges by exiting unprofitable markets.
Nevertheless, HMO industry players are likely to have witnessed an increase in premium from the government businesses – Medicare, Medicare Advantage and Medicaid. A surge in the baby boomer population has led to higher demand for these policies.
In addition, a higher number of enrollees in the Medicare, Medicaid and Medicare Advantage businesses is expected to have driven membership growth in the third quarter. However, this upside might have been partly offset by a decline in membership on the public exchange business.
Moreover, strong balance sheets with low leverage and attractive organic cash flow generation, along with excess capital in the form of statutory reserves and parent cash continue to make this sector attractive.
Another subsector, telehealth service, is witnessing steady business growth with insurers and customers increasingly embracing telehealth. Also, the players will see top-line growth from inorganic growth via acquisitions.
Here, we take a sneak peek at four healthcare stocks scheduled to report their third-quarter figures on Oct 26:
Teladoc Inc. (TDOC - Free Report) is one of the nation’s largest telehealth platforms that delivers on-demand healthcare anytime and anywhere via mobile devices, the Internet, video and phone. Last quarter, Teladoc beat the Zacks Consensus Estimate by 2.6%. Teladoc has a Zacks Rank #3 (Hold). However, the Most Accurate estimate stands at a loss of 36 cents per share, same as the Zacks Consensus Estimate. So, the company has an Earnings ESP of 0.00%. Please check our Earnings ESP Filter that enables you find stocks that are expected to come out with earnings surprises.
With respect to the surprise trend, Teladoc surpassed expectations in two of the last four quarters, with an average beat of 0.55%.
Teladoc is expected to post an operating loss on the back of huge expenses on higher advertising, sales, technology and development, general and administrative and depreciation and amortization expenses. We, however, expect losses to reduce as the company has started to realize leverage from the scale of its operations. While we expect to see a surge in revenues, led by new client wins and positive trends in utilization, the increase in expenses will offset top-line growth. Read more (Will Teladoc Show Any Improvement in Q3 Earnings?)
Aetna Inc. provides healthcare, dental, pharmacy, group life, disability, and long-term care benefits in the United States. Last quarter, Aetna beat the Zacks Consensus Estimate by 4.74%. The Most Accurate estimate stands at $2.05 per share, higher than the Zacks Consensus Estimate of $2.02. So, the company has an Earnings ESP of +1.49%. It carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
With respect to the surprise trend, Aetna surpassed expectations in each of the last four quarters, with an average beat of 7.31%.
We expect Aetna’s third-quarter earnings to see an upside from its Government business, which continues to be its key source of growth. Government premiums now represent nearly 50% of the company’s total healthcare premiums and this business continues to outperform.
More specifically, within the government business, the company’s Medicare business is expected to show superior performance, driven by strong membership growth. The investments made by the company in its value-based care models for Medicare Advantage beneficiaries should drive its financial performance. (Read more: Aetna Q3 Earnings Set to Beat Estimates: Here's Why)
Molina Healthcare Inc. (MOH - Free Report) provides Medicaid-related solutions to meet the health care needs of low-income families and individuals; and to assist state agencies in their administration of the Medicaid program. Last quarter, Molina beat the Zacks Consensus Estimate by 28.85%. Molina has an Earnings ESP of 2.63% and a Zacks Rank #3. The Most Accurate estimate stands at 78 cents per share, two cents above the Zacks Consensus Estimate.
With respect to the surprise trend, though Molina surpassed expectations in three of the last four quarters, an earnings miss in a single quarter led to an average miss of 2.09%.
HEALTHSOUTH Corp. owns and operates inpatient rehabilitation hospitals, home health agencies, and hospice agencies in the United States. The company provides specialized rehabilitative treatment on an inpatient and outpatient basis. Last quarter, the company beat the Zacks Consensus Estimate by 15%. It has an Earnings ESP of 0.00% and a Zacks Rank #3. The Most Accurate estimate stands at 60 cents per share, the same as the Zacks Consensus Estimate.
With respect to the surprise trend, Healthsouth surpassed expectations in three of the last four quarters, with an average beat of 3.51%.
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Healthcare Q3 Earnings Releases on Oct 27: AET, HLS & More
We now have Q3 results from 116 S&P 500 members that combined account for 23.2% of the index’s total market capitalization as per the Earnings Preview article. Total earnings for these companies are up 3.3% from the same period last year on 1.8% higher revenues, with 80.2% beating EPS estimates and 62.9% surpassing top-line expectations.
Healthcare comes under the Medical sector which is one of the seven sectors in the S&P 500 group. So far 11.3% of total Medical sector companies have reported third-quarter results. The sector is expected to deliver 3.7% earnings growth on 7.4% higher revenues in the third quarter. This compares favorably with the projected 0.1% earnings growth on 1.5% increase in revenues for the S&P 500 index.
Healthcare is part of the broader medical sector which includes diversified industries like health maintenance organizations (HMOs) popularly known as health insurers, clinical, laboratories and diagnostics research, medical equipment, hospitals, telehealth services among others.
In the HMO subsector, factors like disappointing public exchange business, increasing medical ratio, and superior government business will majorly affect the earnings of players. Most insurers incurred losses from this business in the first half of the year and the trend is unlikely to reverse this quarter.
Although insurance companies had expected better profitability in 2016 after making meager profits in 2015, the individual exchange business disappointed the firms. Major players incurred losses in this business and are now reducing their participation on exchanges by exiting unprofitable markets.
Nevertheless, HMO industry players are likely to have witnessed an increase in premium from the government businesses – Medicare, Medicare Advantage and Medicaid. A surge in the baby boomer population has led to higher demand for these policies.
In addition, a higher number of enrollees in the Medicare, Medicaid and Medicare Advantage businesses is expected to have driven membership growth in the third quarter. However, this upside might have been partly offset by a decline in membership on the public exchange business.
Moreover, strong balance sheets with low leverage and attractive organic cash flow generation, along with excess capital in the form of statutory reserves and parent cash continue to make this sector attractive.
Another subsector, telehealth service, is witnessing steady business growth with insurers and customers increasingly embracing telehealth. Also, the players will see top-line growth from inorganic growth via acquisitions.
Here, we take a sneak peek at four healthcare stocks scheduled to report their third-quarter figures on Oct 26:
Teladoc Inc. (TDOC - Free Report) is one of the nation’s largest telehealth platforms that delivers on-demand healthcare anytime and anywhere via mobile devices, the Internet, video and phone. Last quarter, Teladoc beat the Zacks Consensus Estimate by 2.6%. Teladoc has a Zacks Rank #3 (Hold). However, the Most Accurate estimate stands at a loss of 36 cents per share, same as the Zacks Consensus Estimate. So, the company has an Earnings ESP of 0.00%. Please check our Earnings ESP Filter that enables you find stocks that are expected to come out with earnings surprises.
With respect to the surprise trend, Teladoc surpassed expectations in two of the last four quarters, with an average beat of 0.55%.
Teladoc is expected to post an operating loss on the back of huge expenses on higher advertising, sales, technology and development, general and administrative and depreciation and amortization expenses. We, however, expect losses to reduce as the company has started to realize leverage from the scale of its operations. While we expect to see a surge in revenues, led by new client wins and positive trends in utilization, the increase in expenses will offset top-line growth. Read more (Will Teladoc Show Any Improvement in Q3 Earnings?)
TELADOC INC Price and EPS Surprise
TELADOC INC Price and EPS Surprise | TELADOC INC Quote
Aetna Inc. provides healthcare, dental, pharmacy, group life, disability, and long-term care benefits in the United States. Last quarter, Aetna beat the Zacks Consensus Estimate by 4.74%. The Most Accurate estimate stands at $2.05 per share, higher than the Zacks Consensus Estimate of $2.02. So, the company has an Earnings ESP of +1.49%. It carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
With respect to the surprise trend, Aetna surpassed expectations in each of the last four quarters, with an average beat of 7.31%.
We expect Aetna’s third-quarter earnings to see an upside from its Government business, which continues to be its key source of growth. Government premiums now represent nearly 50% of the company’s total healthcare premiums and this business continues to outperform.
More specifically, within the government business, the company’s Medicare business is expected to show superior performance, driven by strong membership growth. The investments made by the company in its value-based care models for Medicare Advantage beneficiaries should drive its financial performance. (Read more: Aetna Q3 Earnings Set to Beat Estimates: Here's Why)
AETNA INC-NEW Price and EPS Surprise
AETNA INC-NEW Price and EPS Surprise | AETNA INC-NEW Quote
Molina Healthcare Inc. (MOH - Free Report) provides Medicaid-related solutions to meet the health care needs of low-income families and individuals; and to assist state agencies in their administration of the Medicaid program. Last quarter, Molina beat the Zacks Consensus Estimate by 28.85%. Molina has an Earnings ESP of 2.63% and a Zacks Rank #3. The Most Accurate estimate stands at 78 cents per share, two cents above the Zacks Consensus Estimate.
With respect to the surprise trend, though Molina surpassed expectations in three of the last four quarters, an earnings miss in a single quarter led to an average miss of 2.09%.
MOLINA HLTHCR Price and EPS Surprise
MOLINA HLTHCR Price and EPS Surprise | MOLINA HLTHCR Quote
HEALTHSOUTH Corp. owns and operates inpatient rehabilitation hospitals, home health agencies, and hospice agencies in the United States. The company provides specialized rehabilitative treatment on an inpatient and outpatient basis. Last quarter, the company beat the Zacks Consensus Estimate by 15%. It has an Earnings ESP of 0.00% and a Zacks Rank #3. The Most Accurate estimate stands at 60 cents per share, the same as the Zacks Consensus Estimate.
With respect to the surprise trend, Healthsouth surpassed expectations in three of the last four quarters, with an average beat of 3.51%.
HEALTHSOUTH CP Price and EPS Surprise
HEALTHSOUTH CP Price and EPS Surprise | HEALTHSOUTH CP Quote
Zacks' Best Investment Ideas for Long-Term Profit
Today you can gain access to long-term trades with double and triple-digit profit potential rarely available to the public. Starting now, you can look inside our stocks under $10, home run and value stock portfolios, plus more. Want a peek at this private information? Click here >>