Healthcare Q2 Earnings To Watch This Week: UNH, DGX, ADPT

The second-quarter season will be in full swing this week. So far, we have the results from 36 S&P 500 members that combined account for 10.1% of the index’s total market capitalization as per the Earnings Trends report. Revenues decreased 0.1% and total earnings declined 3.9%. However, the beat ratio is 66.7% for the bottom line and 41.7% for the top line.

We are yet to see the performances of the Medical sector players. The sector is expected to deliver 0.5% earnings growth on 7.7% higher revenues in the second quarter. This compares favorably with the projected 5.9% earnings decline on 0.5% lower revenues in the S&P 500 index.

Healthcare is part of the broader medical sector. Let’s see what factors might have influenced its performance in the second quarter.

Within the Healthcare sector, health insurers are expected to see top-line growth on an increase in member enrollment. The Government business which includes Medicare and Medicaid will likely see a surge in enrollment. Also, ancillary businesses which are outside the purview of the Health Care Reform Act will likely see higher earnings.

While diversified product offerings and expansion into international markets are likely to have beefed up revenues, cost management should give the bottom line a boost.

However, healthcare companies continued to face pressure from pricing, regulatory compliance costs, rising medical costs and competition.

Another sub-segment providing laboratory and diagnostic services is expected to see earnings accretion as the players increase their focus on areas with high potential such as gene-based esoteric testing for cancer, cardiovascular disease, infectious disease and neurological disorders.

Companies within this sector are resorting to tactical approaches to restore improvement in sales and marketing excellence; development of esoteric testing through a disease focus; partnerships with hospitals; creation of value from information assets; leadership in companion diagnostics; and expansion into adjacent markets. A positive effect of these efforts will likely be reflected in second-quarter earnings.

As many as 299 companies will release results from Jul 18–22. Let’s find out what’s in store for three major healthcare providers that will report second-quarter earnings results this week.

Quest Diagnostics Inc. (NYSE:DGX) , headquartered in Madison, NJ, is one of the largest providers of commercial laboratory services in North America. The company delivered in line with the Zacks Consensus Estimate in the last quarter. It has an Earnings ESP of 0.00% and a Zacks Rank #2 (Buy). The Zacks Consensus Estimate for the quarter is pegged at 1.31 per share.

Quest Diagnostics is likely to have benefited from its efforts to expand its esoteric testing business. We also see earnings growth through infectious disease testing, prescription drug monitoring and its industry-leading wellness business. Recent deals and alliances will also contribute to the company’s top line. Nevertheless, earnings may be stressed by multiple reimbursement issues from the recent CMS (Centers for Medicare & Medicaid Services) proposal related to Protecting Access to Medicare Act (PAMA).

With respect to the surprise trend, Quest Diagnostics surpassed expectations in two of the last four quarters, with an average beat of 0.40%. (Read more: Will Quest Diagnostics' (DGX) Earnings Surprise in Q2?)

QUEST DIAGNOSTC Price and EPS Surprise

QUEST DIAGNOSTC Price and EPS Surprise | QUEST DIAGNOSTC Quote

Health insurer UnitedHealth Group Inc. (NYSE:UNH) is scheduled to report second-quarter results before the opening bell on Jul 19. The company is considered the bellwether of the managed care sector since it is the first to report earnings every quarter. The company posted a positive earnings surprise of 5.23% in the last quarter. It has an Earnings ESP of +1.59% and a Zacks Rank #4 (Sell). The Zacks Consensus Estimate for the quarter is pegged at 1.89 per share.

We expect the bottom line at UnitedHealth to benefit from a decline in operating cost ratio due to the combination of business mix and technology-driven operational efficiencies. These efficiency gains will be partially offset by continued investments in businesses.

UnitedHealth’s health services segment branded as Optum has been seeing improving revenues for the past several quarters and the trend will likely be seen this quarter too.

Strong enrollment growth across diversified business segments is expected to give the company’s earnings a boost in the second quarter.
With respect to the surprise trend, UnitedHealth surpassed expectations in each of the last four quarters, with an average beat of 3.12%. (Read more: Will UnitedHealth (UNH) Continue to Beat on Earnings in Q2? )

UNITEDHEALTH GP Price and EPS Surprise

UNITEDHEALTH GP Price and EPS Surprise | UNITEDHEALTH GP Quote

Adeptus Health Inc. (NYSE:ADPT) headquartered in Lewisville, TX, owns and operates a network of independent freestanding emergency rooms in the United States. Last quarter, the company reported earnings of 41 cents per share, which exceeded the Zacks Consensus Estimate by 4 cents. It has an Earnings ESP of 0.00% and a Zacks Rank #5 (Strong Sell). The Zacks Consensus Estimate for the quarter is pegged at 1.31 per share. The company is scheduled to report second-quarter results before the opening bell on Jul 21.

Adeptus continues to introduce and enhance its facilities at a steady clip by establishing partnerships with the leading health care systems of the market. We believe significant growth in same store revenues accompanied by increasing patient volumes will be a key catalyst to the company’s growth.

However, second-quarter results are expected to be impacted by operating losses from First Texas Hospital, as well as incremental operating costs related to the launch of new hospitals.

With respect to the surprise trend, Adeptus surpassed expectations in two of the last four quarters, with an average beat of 65.83%. (Read more:Adeptus Health (ADPT) Q2 Earnings: Will it Beat Estimates?)

ADEPTUS HEALTH Price and EPS Surprise

ADEPTUS HEALTH Price and EPS Surprise | ADEPTUS HEALTH Quote

Keep an eye on our full earnings articles to see how these S&P 500 members finally fared.