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WellCare Health (WCG) Beats on Q2 Earnings, Updates Guidance

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WellCare Health Plans, Inc. (WCG - Free Report) delivered second-quarter 2018 adjusted operating earnings of $3.69 per share, beating the Zacks Consensus Estimate of $3.03 by 21.8%. The bottom line also surged 46.4% 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

Better-than-expected earnings were driven by revenue growth.

Adjusted total premium revenues of $4.5 billion increased 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 8.1% in the reported quarter, up from 7.9% in the year-ago period. This deterioration can be attributed to expenses incurred for company's growth.

Q2 Segment Results

Medicaid Health Plans

As of Jun 30, 2018, membership declined 0.4% to 2.8 million. This slight downtrend was due to a membership decrease in Georgia because of the addition of a fourth managed care organization, effective Jul 1, 2017. However, it was partially offset by additional members owing to the statewide expansion of Illinois' Medicaid program effective Jan 1, 2018.

Adjusted Medicaid Health Plans premium revenues were $2.8 billion, up 1.9% year over year, on higher membership strength. Further, the reinstatement of the ACA HIF in 2018 and the associated Medicaid ACA HIF reimbursement aided to this upside.

Adjusted Medicaid Health Plans’ Medical Benefit Ratio (MBR) was 85.1% compared with 86.8% in the year-ago period. The change is attributable to reinstatement of the Medicaid ACA HIF reimbursement in 2018.

Medicare Health Plans

As of Jun 30 2018, Medicare Health Plans membership was 0.5 million, up 5.4% year over year, driven by continued organic growth.

Medicare Health Plans premium revenues of $1.5 billion increased 17.5% year over year. This uptick was primarily on the back of the company's 2017 buyout of Universal American as well as commendable organic membership growth year over year.

MBR was 82.9% compared with 86.4% in the prior-year quarter. The main reason behind this year-over-year decrease was 2018 bid strategy as well as a consistent operational execution.

Medicare PDP

Medicare PDP membership was approximately 1.1 million as of Jun 30, 2018, down by 5.4% year over year, attributable to bid positioning.

Premium revenues were $200 million, decreasing 11.3% year over year. This fall can be attributed to the decline in membership and the company's 2018 bid positioning.

MBR was 72.7% compared with 86.5% in the year-earlier quarter, the downfall caused by the company’s 2018 bid strategy as well as the continued operational execution.

Financial Update

As of Jun 30, 2018, unregulated cash and investments were $509 million, having dropped 21.4% from the level at year-end 2017.

Net flow from operating activities for the first half of 2018 was $776.6 million, plummeting 132% from the tally in the same period of 2017.

Days in claims payable (DCP) were 55.2 days as of Jun 30, 2018 compared with 7.8 days for the same period in 2017.

Guidance for 2018

Based on a strong first-half performance, WellCare Health raised its full-year adjusted EPS view to a range of $10.70-$10.90, up from the previous projection of $10-$10.30 per share.

Total adjusted premium revenues are expected in the band of $17.9-$18.4 billion, down from the earlier prediction of $17.925-$18.425 billion. Investment & other income is anticipated to be $90-$94 million, lifted from the prior outlook of $72-$78 million.

Adjusted SG&A ratio is now estimated between 8.3% and 8.5%.

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 having reported second-quarter earnings so far, the bottom line of Centene Corp. (CNC - Free Report) , Anthem Inc. (ANTM - Free Report) and UnitedHealth Group Inc. (UNH - Free Report) beat the respective Zacks Consensus Estimate.

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