In second-quarter earnings season, the healthcare industry — comprising health insurers, hospitals, drug makers, etc. — is expected to reiterate its solid performance exhibited in the first three months of this year.
Increase in admission, membership and premium is ought to be the primary catalysts for the companies’ top-line growth in the second quarter. The leading industry players’ performances are also likely to see an uptick on the back of better operational efficiency and restructuring initiatives. A sturdy capital level supporting strategic mergers and acquisitions should also act as a key driver.
Factors to Influence Second-Quarter Earnings
The second-quarter reporting cycle for the industry should be mostly stable with higher enrollments in Medicare and Medicaid plans.
The Medicaid line of business is expected to have witnessed growth from expansion, outsourced by the government to private players. The Medicare lines of business are also well-poised for growth on the back of the surging baby boomer population.
Other factors, such as a hike in same-store patient volumes at home health, are likely to boost the bottom line of the companies. Higher patient visits and licensed beds are expected to contribute to the revenue streams of the industry participants.
The companies are also likely to see an upside owing to strategic alliances and acquisitions, which in turn, helped enhancing their capabilities and penetrating new regions.
Also, a sturdy capital level widens scope for effective capital deployment to fund growth initiatives as well as reward shareholders via dividend raises and share buybacks. This will certainly add an extra edge to the earnings.
However, the healthcare players anticipate a rise in the operating costs due to growth-related initiatives and investments in adapting technology.
The proven Zacks model clearly shows that a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.
Let’s take a sneak peek at how the following healthcare companies are placed ahead of their second-quarter earnings releases on Jul 31.
Humana Inc.’s HUM is well-poised for growth on the back of strategic initiatives and a strong Medicare Business. It expects second-quarter earnings to be about $5.24, indicating a 32.3% surge from the year-ago reported figure. Humana’s solid Medicaid and Medicare lines of businesses are likely to favor its top line. The Zacks Consensus Estimate for revenues is pegged at $15.8 billion, suggesting 11.4% growth from the year-earlier reported number. (Read more: Can Home Health Growth Support Amedisys' Q2 Earnings?)
The company is expected to have seen a rise in the individual Medicare Advantage membership count.
It has a Zacks Rank #3 (Hold) and an Earnings ESP of +1.57%, which together makes us confident of a likely positive surprise. You can see the complete list of today’s Zacks #1 Rank stocks here.
Humana boasts a stellar earnings surprise history, having surpassed estimates in all the trailing four quarters, the average being 5.05%. The same is depicted in the chart below:
Humana Inc. Price and EPS Surprise
Humana Inc. price-eps-surprise | Humana Inc. Quote
Amedisys, Inc. AMED is witnessing encouraging growth in Medicare and non-Medicare revenues. We are upbeat about solid contributions from the company’s business lines, such as Home Health, Hospice and Personal Care in the upcoming quarterly results. In the first quarter, the company generated around 66% of total revenues from Home Health. (Read more: Can Home Health Growth Support Amedisys' Q2 Earnings?)
Within Home Health, in the second quarter, the company is expected to bump up same-store volumes via increased admissions and re-certifications.
It has a Zacks Rank #1 (Strong Buy) and an Earnings ESP of +1.91%, which makes us confident of a likely positive surprise.
The company delivered a positive surprise in three of the trailing four quarters, the average beat being 16.55%. The same is depicted in the chart below:
Amedisys, Inc. Price and EPS Surprise
Amedisys, Inc. price-eps-surprise | Amedisys, Inc. Quote
Charles River Laboratories International, Inc.’s CRL Zacks Consensus Estimate for earnings of $1.55 for the second quarter indicates a decline of 4.3% from the year-ago reported figure. The combination of a Zacks Rank #4 (Sell) and an Earnings ESP of -0.28% makes surprise prediction difficult for the stock.
The company’s earnings outpaced estimates in all the last four quarters, the average being 7.62%. The same is depicted in the chart below:
Charles River Laboratories International, Inc. Price and EPS Surprise
Charles River Laboratories International, Inc. price-eps-surprise | Charles River Laboratories International, Inc. Quote
Teladoc, Inc.’s TDOC Zacks Consensus Estimate for loss of 40 cents is wider than the year-ago period’s loss of 37 cents. Its Zacks Rank of 3 and an Earnings ESP of 0.00% make surprise prediction difficult for us.
The company’s earnings trumped estimates in all the previous four quarters, the average being 2.62%. The same is shown in the chart below:
Teladoc, Inc. Price and EPS Surprise
Teladoc, Inc. price-eps-surprise | Teladoc, Inc. Quote
PRA Health Sciences, Inc.’s PRAH Zacks Consensus Estimate for earnings of $1.20 in its upcoming quarterly release implies a 20% rise from the year-earlier reported figure. Revenues are expected to be $764 million, up 5.7% from the prior-year reported number.
Its Zacks Rank #3 and an Earnings ESP of 0.00% make surprise prediction difficult for us.
The company’s earnings exceeded estimates in all the preceding four quarters, the average being 4.2%. The same is shown in the chart below:
PRA Health Sciences, Inc. Price and EPS Surprise
PRA Health Sciences, Inc. price-eps-surprise | PRA Health Sciences, Inc. Quote
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