U.S. markets closed

Is a Beat in Store for WellCare Health's (WCG) Q1 Earnings?

Zacks Equity Research

WellCare HealthPlans, Inc.'s WCG is scheduled to release first-quarter 2019 results on Apr 30. In the last reported quarter, the company delivered a positive surprise of 5.2%, primarily backed by the Meridian buyout and membership growth. Moreover, the bottom line skyrocketed 409.4% year over year.

The company flaunts an impressive surprise history, having delivered an earnings beat in all the trailing four quarters, the average being 15.43%.

What to Expect for Q1 Earnings

We expect revenues in the quarter under review to have gained from higher membership.  The Zacks Consensus Estimate for first-quarter revenues is pegged at $6.5 billion, indicating a40.8% surge from the year-ago reported figure.

The consensus mark for the company’s first-quarter earnings is pegged at $3.10, suggesting25.5% growth from the prior-year reported number. This uptrend is likely to be supported by solid revenues.

In the to-be-reported quarter, Medicaid Membership is likely to rise on the back of strategic initiatives like the expansion of the company’s contracts. The consensus estimate for total Medicaid membership is pegged at 4.1 billion, implying49.8% growth from the year-earlier period’s level.

The company managed to grow its organic Medicare Advantage by around 16000 members in January 2019, which represents 3% growth from the 2018 end-level. This upside in membership is expected to be consistent in the remainder of the first quarter as well. The Zacks Consensus Estimate for Medicare Advantage membership is pegged at 572 million, indicative of 13% rise from the tally in the comparable quarter last year. The upside is likely to be boosted by organic growth.

The Zacks Consensus Estimate for the company’s total membership stands at 6.2 billion, hinting at 45.1% improvement from the prior-year quarter's reported figure.

However, WellCare Health is likely to suffer the burden of high-debt level due to its growth-related investments, which increases its financial risk.

In the quarter to be reported, the company might face escalated expenses due to higher medical and pharmacy costs, selling, general and administrative (SG&A) expenses as well as operating costs.

What the Quantitative Model States

The proven Zacks model conclusively shows that WellCare Health is likely to beat on earnings this to-be-reported quarter. This is because the stock needs to have the right combination of a positive Earnings ESP and a top Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen.

Earnings ESP: WellCare Health has an Earnings ESP of +1.91%. This is because the Most Accurate Estimate is pegged at $3.16, higher than the Zacks Consensus Estimate of $3.10.You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.

WellCare Health Plans, Inc. Price and EPS Surprise

WellCare Health Plans, Inc. Price and EPS Surprise | WellCare Health Plans, Inc. Quote

Zacks Rank: WellCare Health carries a Zacks Rank #3, which increases the predictive power of ESP. Moreover, a favorable ESP in the combination raises the odds of a likely positive surprise.

Conversely, the Sell-rated stocks (#4 or 5) should never be considered going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Other Stocks to Consider

Some other stocks worth considering from the medical sector with the perfect combination of elements to also surpass estimates in the upcoming quarterly releases are as follows:

Aduro Biotech, Inc. ADRO is slated to release first-quarter earnings figures on May 1. This stock has an Earnings ESP of +82.00% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

bluebird bio, Inc. BLUE has an Earnings ESP of +12.12% and a Zacks Rank #3.The company is set to report first-quarter earnings on May 1.

Humana Inc. HUM is set to report first-quarter 2019earnings performance on May 1. The stock has an Earnings ESP of +0.84% and a Zacks Rank of 3.

Zacks' Top 10 Stocks for 2019

In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-holds for the year?

Who wouldn't? Our annual Top 10s have beaten the market with amazing regularity. In 2018, while the market dropped -5.2%, the portfolio scored well into double-digits overall with individual stocks rising as high as +61.5%. And from 2012-2017, while the market boomed +126.3, Zacks' Top 10s reached an even more sensational +181.9%.

See Latest Stocks Today >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
bluebird bio, Inc. (BLUE) : Free Stock Analysis Report
Aduro Biotech, Inc. (ADRO) : Free Stock Analysis Report
Humana Inc. (HUM) : Free Stock Analysis Report
WellCare Health Plans, Inc. (WCG) : Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research