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Magellan Health (MGLN) to Post Q2 Earnings: What's in Store?

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Magellan Health, Inc. is set to report second-quarter 2019 earnings results on Jul 30.

The Zacks Consensus Estimate for earnings in the to-be-reported quarter is 83 cents per share on revenues of $1.74 billion, which translates into year-over-year decline of 9.78% and 3.7%, respectively.

Factors to Affect Q2 Results

In Healthcare segment, which contributes 70% of the company’s total revenues, we expect solid results from the behavioral and specialty health business. In Magellan Complete Care (MCC), the company expects continued improvements in margins throughout the year as a result of anticipated mid-year rate changes, membership growth and revenue growth, reflecting the results of its quality initiatives and the ongoing impact of its medical action plans.

These increases might be partially offset by targeted MCC investments.
The company’s Pharmacy Benefit Management business, which contributes 30% to total revenues, is expected to see steady growth in segment profit throughout 2019 due to the lower cost of goods led by network pharmacy agreements and implementation of recently negotiated wholesaler agreement.

Another reason for the business line’s growth is the improvement in negotiated rebates. Also, nearly 70% of the new business to be implemented after the first quarter was pre-sold. Moreover, the PBM business should gain from normal margin seasonality.

We expect to see an escalation in operating expenses, led by costs incurred on behalf of operational efficiency improvements.

Earnings Surprise History

The company has missed earnings estimates in three of the trailing four quarters with an average negative surprise of 50.12%. This is depicted in the chart below:

Magellan Health, Inc. Price and EPS Surprise

Here is what our quantitative model predicts:

Our proven model does not conclusively show that Magellan Health is likely to beat earnings estimates this season because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to do so. But that is not the case here.

Earnings ESP: Magellan Health has an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Magellan Health carries a Zacks Rank #3, which increases the predictive power of ESP. However, its 0.00% ESP leaves surprise prediction inconclusive.

Stocks That Warrant a Look

Here are a few stocks that you may want to consider, as our model shows that these have the right combination of elements to beat earnings estimates in the upcoming release.

HCA Healthcare, Inc.  (HCA - Free Report) has an Earnings ESP of +8.4% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Molina Healthcare, Inc. (MOH - Free Report) has an Earnings ESP of +3.02% and a Zacks Rank #1.

WellCare Health Plans, Inc. has an Earnings ESP of +1.65% and carries a Zacks Rank #3.

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