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Will Higher Revenues Buoy Teladoc's (TDOC) Q4 Earnings?

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Teldoc Inc.’s (TDOC - Free Report) fourth-quarter results, scheduled for release on Feb 27, are expected to witness an increase in patient visits — one of the major revenue drivers.

The company’s Telehealth services are gaining rapid acceptance due to their flexibility, cost effectiveness and superior quality, which are driving demand. Consequently, the company witnessed increased patient visits in the fourth quarter. Also, the acquisition of HealthiestYou and Best Doctors is expected to have driven visits and call volumes. The Zacks Consensus Estimate for patient visits is 436,206, reflecting an improvement of 45% year over year.

A major component of the company’s revenues is  subscription access fees, which account for 80-85% of revenues. This was primarily driven by the number of clients and services used. Since the company has been consistently gaining clients by virtue of its superior service, a wide network of doctors and round-the-clock medical assistance, this revenue component is expected to see a surge in the upcoming quarterly results.

The Zacks Consensus Estimate for the same is $64 million, which translates into year-over-year growth of 110.5%.

The company is in its growth phase and incurring heavy expenditure in the form of substantial investments made to acquire new clients, build proprietary network of healthcare providers and develop technology platform. The bottom line will witness a drain, thanks to huge expenses on higher advertising, sales, technology and development, general and administrative functions as well as depreciation and amortization.

However, expenditures are likely to decline as the company has started to realize leverage from the scale of its operation.

Q4 Preliminary Results

Fourth-quarter revenues of $76 million were up 103% year over year. Total adjusted EBITDA was approximately $2.5 million against a loss of around $8 million in the year-ago quarter. Reported total visits of 460,000 rose 48% year over year.

Earnings Surprise History

The company has a mixed earnings history. It beat estimates in two of the trailing four quarters with an average positive surprise of 0.71%.

What our Quantitative Model Predicts

Our proven model shows that Teladoc has the right combination of the two key ingredients to beat estimates.

Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is +28.98%.
The positive ESP is a meaningful indicator of a likely positive earnings surprise. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Teladoc carries a Zacks Rank #3 (Hold). Note that stocks with a Zacks Rank of # 1 (Strong Buy), 2 (Buy) or 3 have a significantly higher chance of beating on earnings.

We caution against Sell-rated stocks (Zacks Rank #4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Other Stocks to Consider

Here are other companies from the healthcare sector you may want to consider as our model shows that these too have the right combination of elements to post an earnings beat:

Envision Healthcare Corp. has an Earnings ESP of +2.51% and a Zacks Rank #3. This company will report fourth-quarter results on Feb 27.  You can see the complete list of today’s Zacks #1 Rank stocks here.

Health Insurance Innovations, Inc. (HIIQ - Free Report) has an Earnings ESP of +3.8% and a Zacks Rank #2. This company will report fourth-quarter results on Feb 28.

Community Health Systems, Inc. (CYH - Free Report) has an Earnings ESP of +2.94% and a Zacks Rank #3. This company will report fourth-quarter results on Feb 27.

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Health Insurance Innovations, Inc. (HIIQ) - free report >>

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Teladoc Health, Inc. (TDOC) - free report >>