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What's in Store for Teladoc's (TDOC) Q4 Earnings?

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Teladoc Health, Inc. (TDOC - Free Report) is scheduled to report fourth-quarter 2018 results on Feb 27, after the market closes.

In the last reported quarter, Teladoc suffered a loss of 34 cents per share, narrower than the Zacks Consensus Estimate of a loss of 36 cents and the year-ago quarter’s loss of 55 cents.

Let’s see, how things are shaping up prior to this announcement.

Teladoc’s revenues witnessed a staggering CAGR of 82% from 2013 to 2017. This uptick was driven by higher membership and patient visits. The third quarter of 2018 was the 23rd consecutive quarter in which, the number of telehealth visits rose faster than its member base. This clearly signals the fast adoption of telehealth services. The trend continued into the first nine months of 2018 as well.

The company is constantly witnessing growth in its client roster owing to the addition of clients across multiple market segments. The company’s emphasis is on increasing value-add clients through product innovation that will help it retain customers. Revenues from clients soared 89% 2017.  In the fourth quarter, the company’s solid client strength should aid its top line.

Teladoc has been banking on acquisitions to boost growth. The recent acquisition of Advance Medical and Best Doctors should favor membership growth, thereby contributing to revenues.

In the third quarter, the company launched Teladoc Global Care, enabling multinational organizations to provide expats and travelers with a single solution for convenient and easy-to-navigate access to quality care, regardless of the geographic location. This is also likely to lend a substantial input to the company’s top line in the yet-to-be-reported quarter.

Teladoc has incurred significant losses in each quarter since its inception. As of Dec 31, 2017, the company’s accumulated deficit was $311.6 million. These losses and accumulated deficit stemmed from the company’s substantial investments in acquiring clients, building its proprietary network of healthcare providers and developing its technology platform.

Accordingly, we anticipate cost of revenues and operating expenses to rise substantially in the near future. These endeavors might prove to be more expensive than currently estimated by the company and it  may not increase its revenues sufficiently for offseting higher expenses. The company expects net loss per share of $1.48-$1.52 in 2018.

Also, the company’s operations consumed astronomical amounts of cash right from the start and it intends to steadily make substantial investments in supporting its business growth, which will require more cash. In all the past three years, the company used cash flow from operations. We believe, the company has a long way to go before it starts generating a positive cash flow from operations. Also, the company’s debt has massively deteriorated in the past four years, inducing a spike in interest costs and consequently, elevating overall expense and causing operating margin erosion.

Guidance

For the fourth quarter, the company expects total revenues of $119-$121 million and total adjusted EBITDA of $4-$6 million. It projects total patient visits between 720,000 and 20,000. Net loss per share, based on 70.4 million weighted average shares outstanding, is expected to range from a loss of 36 cents to a loss of 38 cents.

For 2018, the company anticipates revenues between $414 million and $416 million plus adjusted positive EBITDA between $12 million and $14 million. It predicts total U.S. paid membership of approximately 22.6-23.5 million members while visit fee only access will be available to approximately 9.4 million individuals. Total visits are assumed in the band of 2.5-2.6 million and a net loss per share, based on 65.9 million weighted average shares outstanding, is forecast from $1.48 to $1.50.

Earnings Surprise

The company has surpassed earnings estimates in three of the four quarters, but the average remains a negative surprise of 1.88%. This is depicted in the chart below:

Teladoc, Inc. Price and EPS Surprise

 

What Does the Zacks Model Say?

Our proven model does not conclusively show that Teladoc is likely to beat estimates in the to-be-reported quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen.

Earnings ESP: Teladoc has an Earnings ESP of 0.00% as both the Most Accurate Estimate and the Zacks Consensus Estimate are pegged at an equal value. 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 #4 (Sell). We caution against stocks with a Zacks Ranks of 4 or #5 (Strong Sell) going into the earnings announcement, especially when the company is witnessing negative estimate revisions.

Stocks Worth a Look

Here are a few medical stocks worth considering as these have the perfect mix of elements to beat on earnings in the upcoming quarterly results.

BioDelivery Sciences International, Inc. (BDSI - Free Report) has an Earnings ESP of +38.46% and a Zacks Rank of 1.

You can see the complete list of today's Zacks #1 Rank stocks here.

FibroGen, Inc. (FGEN - Free Report) has an Earnings ESP of +164.71% and a Zacks Rank #3. The company is set to report fourth-quarter financial numbers on Feb 26.

Amicus Therapeutics, Inc. (FOLD - Free Report) is scheduled to announce fourth-quarter 2018 earnings performance on Feb 28. The stock has an Earnings ESP of +10.07% and is a Zacks #3 Ranked player.
 

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