Healthcare Earnings To Watch On Apr 25: ACHC, CNC & UHS

The Q1 earnings season started on a strong note with 24.9% members of the elite S&P 500 Index reporting solid quarterly numbers. According to the latest Earnings Preview, the performance of the 95 index members that have already reported their financial numbers this quarter indicate that total earnings have increased 14.3% on 4.6% higher revenues. The beat ratio is impressive with 72.6% companies surpassing bottom-line expectations and 62.1% outperforming on the top-line front.

This week will see the thick of the Q1 earnings season, with almost 800 companies including 191 S&P 500 members, expected to report. Healthcare, under the Medical umbrella, is one of the seven sectors in the S&P 500 group. So far, only 9.3% of the total Medical sector companies have reported first-quarter results. The beat ratio is strong with 100.0% companies surpassing bottom-line expectations and 80% outperforming on the revenue front.

The sector has been in limelight since the change of power at the White House. President Donald Trump, who is keen to repeal and replace the Health Care Reform Act more popularly called the Obamacare, has injected a fresh dose of uncertainty in the industry. His version of the policy called the American Health Care Act (AHCA) received a lukewarm response, and called for further amendments to the proposed bill. The proposed amendment calls for setting aside funds to be used in covering a portion of costs alongside insurers. This would invariably result in bringing down premium costs while accommodating more people under the healthcare umbrella.

Had the AHCA been passed in its original form (without the proposed amendment), around 6–10 million Americans may have lost coverage. This would invariably have resulted in shrinkage in the customer base for hospital companies as a chunk of the population would lose their healthcare coverage. If the amendment is enacted, it would be effective from Jan 1, 2018.

The ultimate impact on the fortunes of hospital stocks will depend on the face of the law that still remains to take its final shape.

In the mean time, let’s take a sneak peek at the results of these health care stocks that are slated to report first-quarter earnings on Apr 25:

Acadia Healthcare Company, Inc. (NASDAQ:ACHC) provides inpatient behavioral health care services. It provides psychiatric and chemical dependency services, including inpatient psychiatric hospitals, residential treatment centers, outpatient clinics and therapeutic school-based programs. Acadia Healthcare Company, Inc. is headquartered in Franklin, TN.

Last quarter, Acadia Healthcare missed the Zacks Consensus Estimate by 1.69%. This time again, the company is unlikely to come up with a beat.

Acadia Healthcare has an Earnings ESP of -2.17% as the Most Accurate estimate of 45 cents is below he Zacks Consensus Estimate of 46 cents. Also the company has a Zacks Rank #4 (Sell). We caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

With respect to the surprise trend, Acadia Healthcare surpassed earnings expectations in three of the last four quarters, with an average surprise of 2.21%.

Last quarter, Centene surpassed the Zacks Consensus Estimate by 6.25%. This time, however, the company is unlikely to come up with a beat.

With respect to the surprise trend, Centene surpassed expectations in three of the last four quarters, with an average surprise of 5.55%.

The company’s acquisition of Health Net in the last reported quarter is expected to have boosted its top line this time around.

Its new Medicaid contracts are likely have boosted membership and in turn bolstered revenue growth in the to-be-reported quarter.

Centene also started Medicare Advantage plans in four new states in Jan 2017. This is likely to have contributed to revenue growth. Read (What's in the Cards for Centene this Earnings Season?)

Universal Health Services, Inc. (NYSE:UHS) has an Earnings ESP of -0.49% as the Most Accurate estimate of $2.05 is lower than the Zacks Consensus Estimate of $2.06. Though the company has a Zacks Rank #3, the Earnings ESP of -0.49% makes surprise prediction difficult.

Last quarter, Universal Health Services surpassed the Zacks Consensus Estimate by 0.56%. This time, however, the company is unlikely to come up with a beat.

With respect to the surprise trend, Universal Health Services beat expectations in two of the last four quarters, with an average surprise of 0.71%.

For the quarter to be reported, Universal Health Services’ revenue per adjusted patient day for the Behavioral Health division is expected to have grown, continuing the trend displayed previously.

The company’s Acute Care division is also likely to deliver solid performance on the back of increasing adjusted admissions.

Capital expenditure of $520 million during 2016 is likely to show positive results, boosting the top line.

The company’s commitment to enhance shareholders’ value through share repurchases is likely to have positively impacted the bottom line by limiting share count. Read (Universal Health Q1 Earnings: What's in the Cards?).