We now have Q3 results from 291 S&P 500 members that combined account for 58.2% of the index’s total market capitalization as per the latest Earnings Preview report. Total earnings for these companies are up 2.2% from the same period last year on 1.3% higher revenues, with 73.5% beating earnings estimates and 57.4% coming ahead of top-line expectations.
Healthcare comes under the broader Medical sector is one of the seven sectors in the S&P 500 group. So far, 54.7% of the total Medical sector companies have reported third-quarter results. The sector is expected to deliver 6.0% earnings growth on 7.3% higher revenues in the third quarter. This compares favorably with the projected 2.0% earnings growth on a 1.4% increase in revenues in the S&P 500 index.
Healthcare includes diversified industries like health maintenance organizations (HMOs) more popularly known as health insurers, clinical, laboratories and diagnostics research, medical equipment, hospitals, telehealth services and others.
In the HMO subsector, factors like disappointing public exchange business, increasing medical ratio and a well-performing government business will mainly influence the earnings of the players. Most insurers incurred losses from the public exchange business in the first half of the year and the trend is unlikely to reverse this quarter. Although insurance companies had expected better profitability in 2016 after making meager profits in 2015, the individual exchange business disappointed the firms.
Nevertheless, HMO industry players are likely to have witnessed an increase in premium from the government businesses – Medicare, Medicare Advantage and Medicaid. A surge in the baby boomer population led to higher demand for these policies.
In addition, a higher number of enrollees in the Medicare, Medicaid and Medicare Advantage businesses is expected to have driven membership growth in the third quarter. However, this upside might have been partly offset by a decline in membership on the public exchange business.
Moreover, strong balance sheets with low leverage and attractive organic cash flow generation, along with excess capital in the form of statutory reserves and parent cash continue to make this sector attractive.
Another subsector providing clinical research and laboratory services is expected to see top-line growth as pharmaceutical companies continue to increasingly outsource clinical development and commercialization support activities. Moreover, increased use of technology and data assets will drive the performance of the players in this sub-segment.
Here, we take a sneak peek at four healthcare stocks scheduled to report their third-quarter figures on Nov 2:
Anthem Inc. ANTM through its subsidiaries, operates as a health benefits company in the United States. It operates through three segments: Commercial and Specialty Business, Government Business, and Other. Last quarter, the company posted a positive earnings surprise of 2.78%. Anthem carries a Zacks Rank #4 (Sell). It has an Earnings ESP of -2.01% as the Most Accurate estimate stands at $2.44, while the Zacks Consensus Estimate is pegged at $2.49. Please check our Earnings ESP Filter that enables you find stocks that are expected to come out with earnings surprises.
With respect to the surprise trend, Anthem surpassed expectations in three out of the last four quarters, with an average beat of 4.06%.
Anthem’s government Business is expected to have witnessed robust enrollment growth. Medicaid Business is likely to have tapped the huge opportunities available in the market, resulting in an improvement in margin. Consequent to membership growth, operating revenues are likely have improved in the third quarter. The company’s focus on addressing the challenges of rising healthcare costs and the quality of healthcare are expected to have led to the introduction of more customer-centric healthcare solutions. (Read more: Anthem Q3 Earnings: Disappointment in the Cards?)
ANTHEM INC Price and EPS Surprise
ANTHEM INC Price and EPS Surprise | ANTHEM INC Quote
DaVita HealthCare Partners Inc. DVA provides kidney dialysis services for patients suffering from chronic kidney failure or end stage renal disease (ESRD). It operates through two divisions, Kidney Care and HealthCare Partners. Last quarter, the company posted a positive earnings surprise of 3.06%. DaVita has an Earnings ESP of +4.26% and a Zacks Rank #4. The Most Accurate estimate stands at 98 cents per share, while the Zacks Consensus Estimate is pegged at 94 cents.
With respect to the surprise trend, DaVita surpassed expectations in each of the last four quarters, with an average beat of 4.28%.
Davita’s Kidney Care is expected to have performed well in the third quarter due to its continuous investments in capital-efficient technologies. The launch of seven new de novo clinics is likely to have significantly boosted the top line of this segment. (Read more: Will Q3 Earnings Hold a Surprise for Davita Stock?)
DAVITA INC Price and EPS Surprise
DAVITA INC Price and EPS Surprise | DAVITA INC Quote
Quintiles IMS Holdings, Inc. Q provides biopharmaceutical development services and commercial outsourcing services in the Americas, Europe, Africa, and the Asia-Pacific. Last quarter, the company posted a positive earnings surprise of 3.33%. Quintiles has an Earnings ESP of +2.00% as the Most Accurate estimate stands at $1.02 per share, while the Zacks Consensus Estimate is pegged at $1.00. The company carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
With respect to the surprise trend, Quintiles surpassed expectations in each of the last four quarters, with an average beat of 6.58%.
QUINTILES TRANS Price and EPS Surprise
QUINTILES TRANS Price and EPS Surprise | QUINTILES TRANS Quote
Charles River Laboratories International, Inc. CRL, an early-stage contract research company, provides drug discovery and preclinical development services worldwide. It operates through three segments: Research Models and Services (RMS), Discovery and Safety Assessment (DSA), and Manufacturing Support (Manufacturing).
Last quarter, the company posted a positive earnings surprise of 9.09%. Charles River has an Earnings ESP of 0.00% and a Zacks Rank #3 (Hold). The Most Accurate estimate stands at $1.14 per share, same as the Zacks Consensus Estimate.
With respect to the surprise trend, Charles River surpassed expectations in each of the last four quarters, with an average beat of 8.48%.
CHARLES RVR LAB Price and EPS Surprise
CHARLES RVR LAB Price and EPS Surprise | CHARLES RVR LAB Quote
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