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WellCare Health (WCG) Beats Q4 Earnings, Raises '18 View

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WellCare Health Plans, Inc. (WCG - Free Report) reported fourth-quarter 2017 adjusted operating earnings of 32 cents per share that outpaced the Zacks Consensus Estimate of 21 cents. The bottom line, however, declined from $1.03 in the previous-year quarter. The year-over-year deterioration stemmed from higher expenses.

Adjusted total premium revenues of $4.3 billion for the fourth quarter increased 25.5% year over year due to the company's acquisitions of Universal American, Care1st Arizona and Phoenix Health Plan assets and organic growth across all three lines of business.

The adjusted selling, general & administrative (SG&A) expense ratio was 10.2% in the fourth quarter, up from 9% in the year-ago quarter. The deterioration stemmed primarily from the company's acquisitions, staffing and infrastructure costs and variable management incentive compensation due to improved performance.

Full-Year Update

The company reported adjusted earnings of $8.52 in 2017, up 43% from $5.96 in 2016. Full-year earnings also surpassed the Zacks Consensus Estimate of $8.42.

Adjusted premium revenues came in at $16.8 billion, up 21.4% year over year.

Q4 Segment Results

Medicaid Health Plans:

As on Dec 31, 2017, the segment’s membership increased 7% to 2.7 million from 2016 end. The rise was driven by the addition of the company's new Medicaid businesses in Arizona and Nebraska and new members from the state-wide expansion of the Missouri Medicaid program.

Adjusted Medicaid Health Plans premium revenues were $2.6 billion in the quarter, up 15.9% year over year, primarily due to the same reason.

Adjusted Medicaid Health Plans’ Medical Benefit Ratio (MBR) was 90% in the quarter compared with 90.6% in the last-year quarter. The downside was primarily the result of continued operational execution partially offset by the effect of the Illinois prescription drug plans (PDR).

Medicare Health Plans:

As of Dec 31, 2017, Medicare Health Plans membership was 0.496 million, up 43.8% 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 51% on a year-over-year basis to $1.4 billion in the quarter. This was primarily due to the company's acquisition of Universal American, 2017 bid strategy and year-over-year organic membership growth.

The segment’s MBR was 88.4% in the fourth quarter compared with 85.8% in the year-ago quarter due to the buyout of Universal American, the company's 2017 bid strategy and increased investments in quality initiatives.

Medicare PDP:

Medicare PDP membership was approximately 1.2 million as of Dec 31, 2017, up 14.2% year over year, primarily due to the company's 2017 bid positioning.

Premium revenues in the fourth quarter were $218.2 million, up 12.4% year over year due to the company's 2017 bid positioning.

The segment’s MBR for the fourth quarter was 71.4% compared with 58.9% for the last-year quarter. The year-over-year increase was primarily the result of the company's 2017 bid strategy.

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

Financial Update

Net cash used by operating activities was $195.5 million at the end of fourth quarter, down 41% year over year. For 2017, net cash provided by operating activities was $1.05 billion compared with $748.3 million in 2016.

As of Dec 31, 2017, unregulated cash and investments were $617 million, down 32% from 2016 end.

At the end of the year, long-term debt was $1.2 billion, increasing 18.4% from the prior year.

Guidance for 2018 Raised

The company expects adjusted earnings per share in the range of $9.55 to $9.85, up from the previous guidance of $8.40 to $8.65.

Total adjusted premium revenues are expected in the band of $17.92-$18.42 billion, narrowed from its previously guided range of $17.95-$18.47 billion.

Investment & other income is anticipated to be $63-$73 million, unchanged from the earlier guidance.

Adjusted SG&A ratio is expected to be between 8.1% and 8.3%, up from the previously guided range of 8.0-8.2%.

Zacks Rank and Performance of Other Insurers

WellCare carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Among the other firms in the medical sector that have reported fourth-quarter earnings so far, the bottom line at Centene Corp. (CNC - Free Report) , Anthem Inc (ANTM - Free Report) and UnitedHealth Group Inc. (UNH - Free Report) beat their respective Zacks Consensus Estimates.

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