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WellCare Health (WCG) Q1 Earnings Beat, Raises Guidance

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WellCare Health Plans, Inc. delivered first-quarter 2018 adjusted operating earnings of $2.47 per share beating the Zacks Consensus Estimate of $1.95 by 26.7%. The bottom line also surged 53.4% year over year.

WellCare Health Plans, Inc. Price, Consensus and EPS Surprise

 

WellCare Health Plans, Inc. Price, Consensus and EPS Surprise | WellCare Health Plans, Inc. Quote

The year-over-year improvement was fueled by better Medicaid Health Plans and Medicare PDP segments MBRs and the acquisition of Universal American Corp in 2017. Lower tax rate provided additional boost to the bottom line.

Adjusted total premium revenues of $4.5 billion increased 15.6 % year over year on the back of acquisitions of Universal American and net organic growth of the business.

The adjusted selling, general & administrative (SG&A) expense ratio was 7.8% in the reported quarter, up from 7.6% in the year-ago period. The deterioration can be attributed to expenses incurred for the company's growth.

Q1 Segment Results

Medicaid Health Plans

As of Mar 31, 2018, membership increased 3.1% to 2.7 million. This increase was driven by the addition of new members due to statewide expansion of the Missouri Medicaid program and acquisition of assets of Phoenix Health Plans. However, it was partially offset by the membership decline rate in Georgia owing to the addition of a fourth managed care organization.

Adjusted Medicaid Health Plans premium revenues were $2.7 billion, up 6.2% year over year, on higher membership. Further, the reinstatement of the ACA HIF in 2018 and associated Medicaid ACA HIF reimbursement added to the upside.

Adjusted Medicaid Health Plans’ Medical Benefit Ratio (“MBR”) was 89.4% compared with 90.5% in the year-ago quarter attributable to continued operational execution.

Medicare Health Plans

As of Mar 31 2018, Medicare Health Plans membership was 0.5 million, up 42.1% year over year driven by acquisition of Universal American and continued organic growth.

Medicare Health Plans premium revenues of $1.6 billion increased 42.2% year over year. This was primarily due to the company's buyout of Universal American as well as commendable organic membership growth year over year.

MBR was 84% compared with 83% in the year-ago quarter. The main reason behind this year-over-year increase was 2018 bid strategy as well as the buyout of Universal American.

Medicare PDP

Medicare PDP membership was approximately 1.1 million as of Mar 31, 2018, down by 2.4% year over year attributable to bid positioning.

Premium revenues were $259.9 million, decreased 3.1% year over year. This cvcan be attributed to the company's 2018 bid positioning.

MBR was 88.7% compared with 96.9% in the year-ago quarter, attributable to its 2018 bid strategy as well as the continued operational execution.

Financial Update

As of Mar 31, 2018, unregulated cash and investments were $561.3 million, plunging 70.5% year-over-year.

Net flow from operating activities was $445.7 million, up 23% year over year.

Days in claims payable (DCP) was 50.2 days for the first quarter of 2018, compared with 46.2 days in the year-ago quarter.

Guidance for 2018

Based on strong first quarter performance, WellCare Health raised full-year adjusted EPS guidance to a range of $10.00-$10.30, up from the previous guidance of $9.55-$9.85 per diluted share.

Total adjusted premium revenues are still expected in the band of $17.925-$18.425 billion. Investment & other income is anticipated to be $72-$78 million, raised from the prior guidance of $63-$73 million.

Adjusted SG&A ratio is expected to be in between 8.1% and 8.3%.

Zacks Rank and Performance of Other HMOs

WellCare Health carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here . 

Among the other players in the HMO industry that have reported first-quarter earnings, the bottom line of Centene Corp. (CNC - Free Report) , Anthem Inc. and UnitedHealth Group Inc. (UNH - Free Report) beat their respective Zacks Consensus Estimate.

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