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Healthcare Q1 Earnings Due on May 1: AET, HCA, WCG, ACHC
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The first-quarter earnings season has crossed the half way mark and has showcased strong results with earnings and revenue growth on track to reach the highest level in seven years.
Per the latest Earnings Preview, total earnings for the 267 S&P 500 members that have reported results already are up 25.1% from the same period last year on 10% higher revenues. The beat ratio is impressive with 76.8% companies surpassing bottom-line expectations and 73.8% outperforming on the top line.
The Medical sector (one of the 16 Zacks sectors) is expected to deliver 12.9% earnings growth on 7% higher revenues in the first quarter. This is, however, shy of the projected 22.6% and 8.4% revenue and earnings growth, respectively, 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 & nursing homes, telehealth services and more. The sector is so diverse that a single factor influencing one industry positively can be a negative for another. For example flu, which causes an increase in medical services utilization, is an earnings driver for the hospital space, while a negative for insurers as it causes a spike in claims cost.
To put it into perspective, the January-March 2018 period was an unexpectedly brutal flu season, which led to a spike in medical cost for insurers. But because of UnitedHealth’s superior medical cost management, the flu season did not have any adverse impact on the company’s results. UnitedHealth is considered a bellwether for the other companies and its results provide a broad picture of the industry that despite increased flu, the first quarter will be profitable.
Health insurers are likely to have witnessed an increase in premium and enrollment from the government businesses – Medicare, Medicare Advantage and Medicaid. A surge in the baby boomer population has led to higher demand for these policies. Earnings should also see an upside from ancillary and health service businesses, which health insurers have been investing in for the past many years to diversify revenue base. These businesses which focus on data management, management of clinical records, analytics, clinical care, pharmacy care and more have been a nice contributor to the group’s earnings in recent years and the trend is expected to continue.
However, this severe flu season should be a shot in the arm for care providers and other companies all along the pharmaceutical supply chain, as it would lead to higher revenues from increasing hospital visits and drug sales. Companies in the hospital sector should see increased patient revenues and admissions as more patients seek medical help, which in turn should drive their top-line growth.
Nevertheless, the hospital companies should continue to feel the heat, from walk-in clinics and other outpatient treatment options that have been eating into their admissions volumes for past many quarters.
Let’s find out where the following healthcare stocks stand ahead of their first-quarter releases on May 1.
Aetna Inc. 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.
A decline in tax rate as a result of the Tax Cuts and Jobs Act and reduced losses from the individual exchange business will aid margins.
The Zacks Consensus Estimate of $2.97 for the yet-to-be-reported quarter reflects 10% year-over-year growth. Aetna carries a Zacks Rank #3 (Hold), which increases the predictive power of ESP. Moreover, its Earnings ESP of +0.43%, makes us confident of a positive earnings surprise. (Read more: Will Higher Medicare Revenues Aid Aetna Q1 Earnings?)
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:
HCA Healthcare, Inc. (HCA - Free Report) should see higher flu-related volumes combined with the anticipated benefits from the income tax reform and an earnings upside from favorable exchange rates.
However, the company’s first-quarter results are expected to suffer from industry-wide softness in volumes. Factors like payor initiatives to move volumes away from hospitals, rising deductibles and the prevalence of high deductible health plans, and an increased proportion of hospital care to be paid by consumers are likely to lower volumes.
The Zacks Consensus Estimate of $2.07 per share for the yet-to-be-reported quarter reflects 19% year-over-year growth. HCA Healthcare carries a Zacks Rank #4 (Sell) and an Earnings ESP of -2.14%. Note that we caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into an earnings announcement, especially when the company is seeing negative estimate revisions. (Read more: HCA Healthcare to Report Q1 Earnings: What's in Store?).
The company beat earnings estimate in one of the trailing four quarters and missed in two. However, the company delivered an average positive surprise of 2.23%. This is depicted in the chart below:
WellCare Health Plans, Inc. focuses exclusively on providing government-sponsored managed care services, primarily through Medicaid, Medicare Advantage and Medicare Prescription Drug Plans, to families, children, seniors and individuals with complex medical needs. The Zacks Consensus Estimate of $1.95 per share for the yet-to-be-reported quarter reflects 21.1% year-over-year earnings growth.
WellCare Health carries a Zacks Rank #2 (Buy), which increases the predictive power of ESP. Moreover, its Earnings ESP of +3.15% makes us confident of a likely earnings surprise in the to-be reported quarter.
The company beat earnings estimate in each of the trailing four quarters, with an average positive surprise of 53.85%. This is depicted in the chart below:
WellCare Health Plans, Inc. Price and EPS Surprise
Acadia Healthcare Company, Inc. (ACHC - Free Report) provides inpatient behavioral health care services. It provides psychiatric and chemical dependency services, including inpatient psychiatric hospitals, residential treatment centers, outpatient clinics and therapeutic school-based programs.
The Zacks Consensus Estimate of 48 cents per share for the yet-to-be-reported quarter reflects 4.35% year-over-year earnings growth. Acadia Healthcare carries a Zacks Rank #3, which increases the predictive power of ESP. Moreover, its Earnings ESP of +1.05% makes us confident of an earnings surprise in the to-be reported quarter.
The company beat earnings estimate in two of the trailing four quarters, with an average positive surprise of 0.42%. This is depicted in the chart below:
Acadia Healthcare Company, Inc. Price and EPS Surprise
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
Image: Bigstock
Healthcare Q1 Earnings Due on May 1: AET, HCA, WCG, ACHC
The first-quarter earnings season has crossed the half way mark and has showcased strong results with earnings and revenue growth on track to reach the highest level in seven years.
Per the latest Earnings Preview, total earnings for the 267 S&P 500 members that have reported results already are up 25.1% from the same period last year on 10% higher revenues. The beat ratio is impressive with 76.8% companies surpassing bottom-line expectations and 73.8% outperforming on the top line.
The Medical sector (one of the 16 Zacks sectors) is expected to deliver 12.9% earnings growth on 7% higher revenues in the first quarter. This is, however, shy of the projected 22.6% and 8.4% revenue and earnings growth, respectively, 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 & nursing homes, telehealth services and more. The sector is so diverse that a single factor influencing one industry positively can be a negative for another. For example flu, which causes an increase in medical services utilization, is an earnings driver for the hospital space, while a negative for insurers as it causes a spike in claims cost.
To put it into perspective, the January-March 2018 period was an unexpectedly brutal flu season, which led to a spike in medical cost for insurers. But because of UnitedHealth’s superior medical cost management, the flu season did not have any adverse impact on the company’s results. UnitedHealth is considered a bellwether for the other companies and its results provide a broad picture of the industry that despite increased flu, the first quarter will be profitable.
Health insurers are likely to have witnessed an increase in premium and enrollment from the government businesses – Medicare, Medicare Advantage and Medicaid. A surge in the baby boomer population has led to higher demand for these policies. Earnings should also see an upside from ancillary and health service businesses, which health insurers have been investing in for the past many years to diversify revenue base. These businesses which focus on data management, management of clinical records, analytics, clinical care, pharmacy care and more have been a nice contributor to the group’s earnings in recent years and the trend is expected to continue.
However, this severe flu season should be a shot in the arm for care providers and other companies all along the pharmaceutical supply chain, as it would lead to higher revenues from increasing hospital visits and drug sales. Companies in the hospital sector should see increased patient revenues and admissions as more patients seek medical help, which in turn should drive their top-line growth.
Nevertheless, the hospital companies should continue to feel the heat, from walk-in clinics and other outpatient treatment options that have been eating into their admissions volumes for past many quarters.
Let’s find out where the following healthcare stocks stand ahead of their first-quarter releases on May 1.
Aetna Inc. 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.
A decline in tax rate as a result of the Tax Cuts and Jobs Act and reduced losses from the individual exchange business will aid margins.
The Zacks Consensus Estimate of $2.97 for the yet-to-be-reported quarter reflects 10% year-over-year growth. Aetna carries a Zacks Rank #3 (Hold), which increases the predictive power of ESP. Moreover, its Earnings ESP of +0.43%, makes us confident of a positive earnings surprise. (Read more: Will Higher Medicare Revenues Aid Aetna Q1 Earnings?)
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
HCA Healthcare, Inc. (HCA - Free Report) should see higher flu-related volumes combined with the anticipated benefits from the income tax reform and an earnings upside from favorable exchange rates.
However, the company’s first-quarter results are expected to suffer from industry-wide softness in volumes. Factors like payor initiatives to move volumes away from hospitals, rising deductibles and the prevalence of high deductible health plans, and an increased proportion of hospital care to be paid by consumers are likely to lower volumes.
The Zacks Consensus Estimate of $2.07 per share for the yet-to-be-reported quarter reflects 19% year-over-year growth. HCA Healthcare carries a Zacks Rank #4 (Sell) and an Earnings ESP of -2.14%. Note that we caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into an earnings announcement, especially when the company is seeing negative estimate revisions. (Read more: HCA Healthcare to Report Q1 Earnings: What's in Store?).
The company beat earnings estimate in one of the trailing four quarters and missed in two. However, the company delivered an average positive surprise of 2.23%. This is depicted in the chart below:
HCA Healthcare, Inc. Price and EPS Surprise
HCA Healthcare, Inc. Price and EPS Surprise | HCA Healthcare, Inc. Quote
WellCare Health Plans, Inc. focuses exclusively on providing government-sponsored managed care services, primarily through Medicaid, Medicare Advantage and Medicare Prescription Drug Plans, to families, children, seniors and individuals with complex medical needs.
The Zacks Consensus Estimate of $1.95 per share for the yet-to-be-reported quarter reflects 21.1% year-over-year earnings growth.
WellCare Health carries a Zacks Rank #2 (Buy), which increases the predictive power of ESP. Moreover, its Earnings ESP of +3.15% makes us confident of a likely earnings surprise in the to-be reported quarter.
The company beat earnings estimate in each of the trailing four quarters, with an average positive surprise of 53.85%. This is depicted in the chart below:
WellCare Health Plans, Inc. Price and EPS Surprise
WellCare Health Plans, Inc. Price and EPS Surprise | WellCare Health Plans, Inc. Quote
Acadia Healthcare Company, Inc. (ACHC - Free Report) provides inpatient behavioral health care services. It provides psychiatric and chemical dependency services, including inpatient psychiatric hospitals, residential treatment centers, outpatient clinics and therapeutic school-based programs.
The Zacks Consensus Estimate of 48 cents per share for the yet-to-be-reported quarter reflects 4.35% year-over-year earnings growth. Acadia Healthcare carries a Zacks Rank #3, which increases the predictive power of ESP. Moreover, its Earnings ESP of +1.05% makes us confident of an earnings surprise in the to-be reported quarter.
The company beat earnings estimate in two of the trailing four quarters, with an average positive surprise of 0.42%. This is depicted in the chart below:
Acadia Healthcare Company, Inc. Price and EPS Surprise
Acadia Healthcare Company, Inc. Price and EPS Surprise | Acadia Healthcare Company, Inc. Quote
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>