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WellCare Health (WCG) Up 2.9% Since Earnings Report: Can It Continue?

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A month has gone by since the last earnings report for WellCare Health Plans, Inc. (WCG - Free Report) . Shares have added about 2.9% in that time frame.

Will the recent positive trend continue leading up to its next earnings release, or is WCG due for a pullback? 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 (WCG - Free Report) Q1 Earnings Beat, Raises Guidance

WellCare Health Plans 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 lThe 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%.ine also surged 53.4% year over year.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended upward during the past month. There have been six revisions higher for the current quarter compared to two lower.

WellCare Health Plans, Inc. Price and Consensus

 

VGM Scores

At this time, WCG has a strong Growth Score of A, though it is lagging a lot on the momentum front with a D. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Zacks' style scores indicate that the company's stock is suitable for value and growth investors.

Outlook

Estimates have been broadly trending upward for the stock and the magnitude of these revisions looks promising. It comes with little surprise WCG has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.




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