Aetna (AET) Poised To Beat On Earnings In Q2: Here's Why

Health insurer Aetna Inc. (NYSE:AET) is scheduled to release second-quarter financial results before market open on Aug 2.

In the last reported quarter, the company beat the earnings estimate by 3.6%. Moreover, the company posted a positive earnings surprise in each of the last four quarters, with an average beat of 8.98%. Let’s see how things are shaping up for this announcement.

Why a Likely Positive Surprise?

Our proven model shows that Aetna is likely to beat on earnings as it has the right combination of the two key components. Note that a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy) or #2 (Buy) or at least #3 (Hold) to have a significantly higher chance of beating estimates.

Zacks ESP: The Earnings ESP for Aetna is +3.32%. This is because the Most Accurate estimate of $2.18 per share is above the Zacks Consensus Estimate of $2.11 per share.

Zacks Rank: Aetna’s Zacks Rank #2 increases the predictive power of ESP.

Factors to Drive Q2 Results

Aetna earnings will see an upside from its Government business, which continues to be a key source of growth. Within the Government business, Medicare business is expected to see membership growth. Also, Medicaid is expected to deliver another quarter of solid revenue growth and underwriting margin driven by a combination of new contract wins, county expansion in existing states and ACA-related expansion membership.

We also expect to see favorable prior-year reserve development across all of its core products which should lift earnings.

However, the bottom line might be hurt by the absence of share buyback during the second quarter due to the proposed Humana acquisition.

AETNA INC-NEW Price and EPS Surprise

Other Stocks to Consider

Here are some other companies you may want to consider as our model shows that these also have the right combination of elements to post an earnings beat this quarter:

ANI Pharmaceuticals, Inc. (NASDAQ:ANIP) has an Earnings ESP of +2.63% and a Zacks Rank #1. The company is scheduled to release second-quarter results on Aug 2.

Humana Inc. (NYSE:HUM) has an Earnings ESP of +0.44% and a Zacks Rank #2. The company is scheduled to release second-quarter results on Aug 3.

Galena Biopharma (NASDAQ:GALE) has an Earnings ESP of +28.57% and a Zacks Rank #2. The company is scheduled to release second-quarter earnings on Aug 9.