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Shares of Health Insurance Innovations, Inc. HIIQ hit a new 52-week high of $51.60 on Aug 16, gaining traction from strong first-quarter 2018 earnings. About 0.4 million shares exchanged hands in the last trading session and the stock finally closed at $51.10. The company’s return on equity has been an impressive 30.6% when compared with the industry average of 6.2%.
Stellar Q2 Results
Health Insurance Innovations’ record bottom line of 61 cents outpaced the Zacks Consensus Estimate by 5.2% and surged nearly 33% year over year on higher revenues from increased policies in force and lower taxes.
Revenues increased 16% year over year while total policies in force jumped to a record 389,600, up 8.4% year over year.
Shares of the company have rallied 34.3% since it posted strong second-quarter results. The figure came in against the industry’s decline of 0.9% over the same time frame. This Zacks Rank #3 (Hold) life insurer flaunts a commendable surprise history, beating estimates for 13 straight quarters with an average beat of 132.93%.
Why Should the Stock Continue the Bull Run?
Riding high on a solid earnings performance, the life insurer raised its 2018 revenue guidance to a band of $293-$303 million from $290-$300 million, expected earlier. This upside also represents a 17-21% rise year over year.
Adjusted EBITDA is estimated to improve 20-25% year over year to $55-$58 million, up from $54-$57 million, projected in the past.
Lower taxes should aid adjusted earnings per share to grow at a faster pace and the same is expected between $2.47 and $2.57, up from the former forecast of $2.45-$2.55 range.
Health Insurance Innovations remains focused on ramping up revenues with innovative and disruptive products. This in turn should drive profitability. The company also identifies an individual market to offer sustained growth opportunities and thus remains focused on extends its suite of product offerings into the same. Focus on distributors handing out products with higher margins bodes well.
Health Insurance Innovations’ operating leverage from the technology platform is likely to boost its revenues and the cost-control initiatives to favor its margin expansion
The Department of Health and Human Services of the US government passed a rule this month that would change the maximum duration of short-term medical policies to less than one year from the present duration of less than three months. Also, the rule allows a more affordable health insurance option.
Implementation of the rule on Oct 1, 2018 will help the company generate additional revenues from Short-Term Medical insurance, an important healthcare solution. The company expects to gain from this regulatory tailwind.
The life insurer also believes that elimination of the mandate tax penalty for consumers without an ACA compliant health insurance will be a catalyst for growth in 2019.
The Zacks Consensus Estimate for 2018 earnings reflects a 51.5% surge on 19.6% higher revenues. The consensus mark for the top and bottom line per share in 2019 translates into a year-over-year rise of 14.5% each. Over the past 30 days, the consensus estimate has moved 0.8% north for 2018 and 2.9% for 2019.
Health Insurance Innovations has an impressive Growth Score of B. Growth Style Score analyzes a company’s growth prospects and also evaluates its corporate financial statements. Studies have shown that stocks exhibiting the best growth characteristics consistently outperform the market.
Stocks to Consider
Some better-ranked stocks from the life insurance industry are Genworth Financial, Inc. GNW, American Equity Investment Life Holding Company AEL and Primerica, Inc. PRI.
Genworth Financial provides insurance and homeownership solutions in the United States and internationally. It pulled off an average four-quarter positive surprise of 63.32%. The stock sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
American Equity Investment provides life insurance products and services in the United States. The company came up with an average four-quarter earnings surprise of 22.24%. The stock has a Zacks Rank #2 (Buy).
Primerica distributes financial products to middle income households in the United States and Canada. It delivered an average four-quarter beat of 5.89%. The stock carries a Zacks Rank of 2.
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