It has been about a month since the last earnings report for WellCare Health Plans, Inc. . Shares have lost about 1.6% in that time frame, underperforming the market.
Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
WellCare Health Beats on Q2 Earnings and Revenues
WellCare Health reported second-quarter 2017 adjusted operating earnings of $2.52 per share that surpassed the Zacks Consensus Estimate of $2.23 by 13%. Earnings per share also grew 13% year over year. The year-over-year improvement was primarily backed by strong results across its all three business lines.
Adjusted net income for the second quarter was $113.4 million, up 14% over the year-ago quarter. The upside was primarily driven by the premium revenue growth in the company's Medicaid Health Plans and Medicare Health Plans segments and continued operational execution.
Operational Update
Adjusted total premium revenues of $4.3 billion for the second quarter increased 21.6% year over year due to strong organic growth across its three lines of business and the company's acquisition of Universal American and Care1st Arizona. Revenues also surpassed the Zacks Consensus Estimate by 8%.
Adjusted Selling, General & Administrative (SG&A) expenses were $336.7 million, up 25% year over year. The adjusted SG&A expense ratio was 7.9%, down 20 basis points (bps). The deterioration stemmed primarily from the company's acquisitions of Universal American and Care1st Arizona as well as staffing and infrastructure costs to support organic growth.
Quarterly Segment Update
Medicaid Health Plans:
The segment’s membership increased 17% to 2.8 million from the last-year quarter.
Adjusted Medicaid Health Plans premium revenues were $2.7 billion, up 18.7% year over year, primarily due to membership growth.
Adjusted Medicaid Health Plans’ Medical Benefit Ratio (MBR) was 87.7%, up 100 bps from the last-year quarter.
Medicare Health Plans Segment Results:
Medicare Health Plans membership was 0.484 million, up 46.2% year over year due to the company's acquisition of Universal American, 2017 bid positioning and continued execution on sales and retention initiatives.
Medicare Health Plans premium revenues increased 33.3% on a year-over-year basis to $1.3 billion. This was primarily due to the company's acquisition of Universal American and year-over-year organic membership growth.
The segment’s MBR was 86.4%, up 220 bps due to continued operational execution as well as the company's 2017 bid strategy.
Medicare Prescription Drug Plans (PDP) Segment Results
Medicare PDP membership was 1.1 million, increasing 10.3% year over year primarily as a result of the company's 2017 bid positioning.
Medicare PDP premium revenues were $225.6 million, flat year over year.
The Medicare PDP segment’s MBR was 86.5%, up 1140 bps. This was due to improved operational execution and the company's 2017 bid positioning.
Financial Update
Net cash provided by operating activities was $335 million against net cash of $60.2 million used by operating activities in the prior-year quarter. As of Jun 30, 2017, cash and cash equivalents of $4 billion inched up 2% from year-end 2016.
As of Jun 30, 2017, long term debt of $1.2 billion increased 18% from year-end 2016.
Guidance for 2017 Raised
The company expects adjusted earnings per diluted share in the range of $6.75–$6.95, up from previous guidance of $6.55 to $6.80.
Total adjusted premium revenues are expected in the band of $16.45–$16.85 billion, same as its previous guidance.
Investment & other income is anticipated to be $40–$45 million, same as the previous guidance.
Adjusted SG&A ratio is expected between 8.0% and 8.25%, up from the previous guided range of 7.95% to 8.20%.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed a downward trend in fresh estimates. There has been one revision higher for the current quarter compared to five lower.
VGM Scores
At this time, the stock has an average Growth Score of C, while its Momentum is lagging a lot with an F. Meanwhile, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Based on our scores, the stock is more suitable for value investors than those looking for growth.
Outlook
Estimates have been broadly trending downward for the stock. The magnitude of this revision also indicates a downward shift. Interestingly, the stock has a Zacks Rank #2 (Buy). We are expecting an above average return from the stock in the next few months.
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Why Is WellCare Health Plans (WCG) Down 1.6% Since the Last Earnings Report?
It has been about a month since the last earnings report for WellCare Health Plans, Inc. . Shares have lost about 1.6% in that time frame, underperforming the market.
Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
WellCare Health Beats on Q2 Earnings and Revenues
WellCare Health reported second-quarter 2017 adjusted operating earnings of $2.52 per share that surpassed the Zacks Consensus Estimate of $2.23 by 13%. Earnings per share also grew 13% year over year. The year-over-year improvement was primarily backed by strong results across its all three business lines.
Adjusted net income for the second quarter was $113.4 million, up 14% over the year-ago quarter. The upside was primarily driven by the premium revenue growth in the company's Medicaid Health Plans and Medicare Health Plans segments and continued operational execution.
Operational Update
Adjusted total premium revenues of $4.3 billion for the second quarter increased 21.6% year over year due to strong organic growth across its three lines of business and the company's acquisition of Universal American and Care1st Arizona. Revenues also surpassed the Zacks Consensus Estimate by 8%.
Adjusted Selling, General & Administrative (SG&A) expenses were $336.7 million, up 25% year over year. The adjusted SG&A expense ratio was 7.9%, down 20 basis points (bps). The deterioration stemmed primarily from the company's acquisitions of Universal American and Care1st Arizona as well as staffing and infrastructure costs to support organic growth.
Quarterly Segment Update
Medicaid Health Plans:
The segment’s membership increased 17% to 2.8 million from the last-year quarter.
Adjusted Medicaid Health Plans premium revenues were $2.7 billion, up 18.7% year over year, primarily due to membership growth.
Adjusted Medicaid Health Plans’ Medical Benefit Ratio (MBR) was 87.7%, up 100 bps from the last-year quarter.
Medicare Health Plans Segment Results:
Medicare Health Plans membership was 0.484 million, up 46.2% year over year due to the company's acquisition of Universal American, 2017 bid positioning and continued execution on sales and retention initiatives.
Medicare Health Plans premium revenues increased 33.3% on a year-over-year basis to $1.3 billion. This was primarily due to the company's acquisition of Universal American and year-over-year organic membership growth.
The segment’s MBR was 86.4%, up 220 bps due to continued operational execution as well as the company's 2017 bid strategy.
Medicare Prescription Drug Plans (PDP) Segment Results
Medicare PDP membership was 1.1 million, increasing 10.3% year over year primarily as a result of the company's 2017 bid positioning.
Medicare PDP premium revenues were $225.6 million, flat year over year.
The Medicare PDP segment’s MBR was 86.5%, up 1140 bps. This was due to improved operational execution and the company's 2017 bid positioning.
Financial Update
Net cash provided by operating activities was $335 million against net cash of $60.2 million used by operating activities in the prior-year quarter. As of Jun 30, 2017, cash and cash equivalents of $4 billion inched up 2% from year-end 2016.
As of Jun 30, 2017, long term debt of $1.2 billion increased 18% from year-end 2016.
Guidance for 2017 Raised
The company expects adjusted earnings per diluted share in the range of $6.75–$6.95, up from previous guidance of $6.55 to $6.80.
Total adjusted premium revenues are expected in the band of $16.45–$16.85 billion, same as its previous guidance.
Investment & other income is anticipated to be $40–$45 million, same as the previous guidance.
Adjusted SG&A ratio is expected between 8.0% and 8.25%, up from the previous guided range of 7.95% to 8.20%.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed a downward trend in fresh estimates. There has been one revision higher for the current quarter compared to five lower.
WellCare Health Plans, Inc. Price and Consensus
WellCare Health Plans, Inc. Price and Consensus | WellCare Health Plans, Inc. Quote
VGM Scores
At this time, the stock has an average Growth Score of C, while its Momentum is lagging a lot with an F. Meanwhile, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Based on our scores, the stock is more suitable for value investors than those looking for growth.
Outlook
Estimates have been broadly trending downward for the stock. The magnitude of this revision also indicates a downward shift. Interestingly, the stock has a Zacks Rank #2 (Buy). We are expecting an above average return from the stock in the next few months.