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Will Higher Medicare Revenues Aid Aetna (AET) Q1 Earnings?
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Aetna Inc. is scheduled to announce first-quarter 2018 results on May 1, before the opening bell.
The company is expected to gain from the projected increase in net income and adjusted earnings resulting from lower taxes, strong growth in individual Medicare Advantage products and group Medicare Advantage products, as well as lesser losses from the exiting Individual Commercial products in 2018.
Earnings Surprise History
The company boasts an attractive earnings surprise history, having surpassed estimates in each of the trailing four quarters, with an average positive surprise of 21.5%. This is depicted in the chart below:
Our proven model indicates that chances of Aetna beating the Zacks Consensus Estimate is high as it has the right combination of the two key ingredients — positive Earnings ESP and a Zacks Rank #3 (Hold) or better.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks ESP: The Earnings ESP for Aetna is +0.43%.
Zacks Rank: Aetna has a Zacks Rank #3, which increases the predictive power of ESP.
Factors to Influence Q1 Results
Higher Membership in Government Business: We expect higher membership in this business given the company's expansion focus. The Medicare business performed exceptionally well in the past several quarters and the trend is expected to continue in the to-be reported quarter, led by its strong star ratings, attractive product designs and increasing geographic presence. Per the Zacks Consensus Estimate, membership in the company's Medicare Advantage business should be 1.66 million, up 15.2% year over year. The same for Medicare Supplement should be 774,000, up 8.9% year over year.
Tax Reform Upside: As a result of the Tax Cuts and Jobs Act of 2017, which was effective in December 2017, Aetna projects its corporate income tax rate to decline. Aetna estimates that the tax reform will increase gross 2018 adjusted earnings by approximately $800 million, of which at least 50% will accrue to adjusted earnings. Thus the tax reform should benefit the company’s margins in the first quarter.
Reduced Loss From Pubic Exchange Business: Aetna has been suffering losses on its public exchanges business for the past two years. Lackluster results have forced the company to substantially reduce its risk exposure to these products for 2017. The company has significantly reduced its exposure to Individual Commercial products for 2018. The curtailment of this business will help in reduction of losses.
Lower Revenues: Aetna's revenues are expected to remain under pressure in 2018 owing to the sale of its domestic group life insurance, group disability insurance and absence management business lines; the previously disclosed Medicaid contract termination; exits from Individual Commercial products and continued repositioning of its ACA compliant small group Commercial products. The Zacks Consensus Estimate for first-quarter revenues is $15.3 billion, down 1.13% year over year.
Zacks Rank and Other Stocks
Here are some other companies that you may consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:
Humana Inc. (HUM - Free Report) is expected to report first-quarter 2018 earnings results on May 2. The company has an Earnings ESP of +0.20% and a Zacks Rank #2 (Buy).
WellCare Health Plans, Inc. has an Earnings ESP of +3.15% and a Zacks Rank #2. The company is expected to report first-quarter earnings results on May 1.
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Will Higher Medicare Revenues Aid Aetna (AET) Q1 Earnings?
Aetna Inc. is scheduled to announce first-quarter 2018 results on May 1, before the opening bell.
The company is expected to gain from the projected increase in net income and adjusted earnings resulting from lower taxes, strong growth in individual Medicare Advantage products and group Medicare Advantage products, as well as lesser losses from the exiting Individual Commercial products in 2018.
Earnings Surprise History
The company boasts an attractive earnings surprise history, having surpassed estimates in each of the trailing four quarters, with an average positive surprise of 21.5%. This is depicted in the chart below:
Aetna Inc. Price and EPS Surprise
Aetna Inc. Price and EPS Surprise | Aetna Inc. Quote
Why a Likely Positive Surprise?
Our proven model indicates that chances of Aetna beating the Zacks Consensus Estimate is high as it has the right combination of the two key ingredients — positive Earnings ESP and a Zacks Rank #3 (Hold) or better.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks ESP: The Earnings ESP for Aetna is +0.43%.
Zacks Rank: Aetna has a Zacks Rank #3, which increases the predictive power of ESP.
Factors to Influence Q1 Results
Higher Membership in Government Business: We expect higher membership in this business given the company's expansion focus. The Medicare business performed exceptionally well in the past several quarters and the trend is expected to continue in the to-be reported quarter, led by its strong star ratings, attractive product designs and increasing geographic presence. Per the Zacks Consensus Estimate, membership in the company's Medicare Advantage business should be 1.66 million, up 15.2% year over year. The same for Medicare Supplement should be 774,000, up 8.9% year over year.
Tax Reform Upside: As a result of the Tax Cuts and Jobs Act of 2017, which was effective in December 2017, Aetna projects its corporate income tax rate to decline. Aetna estimates that the tax reform will increase gross 2018 adjusted earnings by approximately $800 million, of which at least 50% will accrue to adjusted earnings. Thus the tax reform should benefit the company’s margins in the first quarter.
Reduced Loss From Pubic Exchange Business: Aetna has been suffering losses on its public exchanges business for the past two years. Lackluster results have forced the company to substantially reduce its risk exposure to these products for 2017. The company has significantly reduced its exposure to Individual Commercial products for 2018. The curtailment of this business will help in reduction of losses.
Lower Revenues: Aetna's revenues are expected to remain under pressure in 2018 owing to the sale of its domestic group life insurance, group disability insurance and absence management business lines; the previously disclosed Medicaid contract termination; exits from Individual Commercial products and continued repositioning of its ACA compliant small group Commercial products. The Zacks Consensus Estimate for first-quarter revenues is $15.3 billion, down 1.13% year over year.
Zacks Rank and Other Stocks
Here are some other companies that you may consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:
Humana Inc. (HUM - Free Report) is expected to report first-quarter 2018 earnings results on May 2. The company has an Earnings ESP of +0.20% and a Zacks Rank #2 (Buy).
Molina Healthcare, Inc. (MOH - Free Report) is expected to report first-quarter earnings results on Apr 30. It has an Earnings ESP of +6.8% and a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
WellCare Health Plans, Inc. has an Earnings ESP of +3.15% and a Zacks Rank #2. The company is expected to report first-quarter earnings results on May 1.
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
See the pot trades we're targeting>>