A month has gone by since the last earnings report for WellCare Health Plans (WCG). Shares have added about 6.4% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is WellCare due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
WellCare Health Q1 Earnings Beat Estimates, Rise Y/Y
WellCare Health delivered first-quarter 2019 adjusted operating earnings of $3.69 per share, beating the Zacks Consensus Estimate by 19%. This upside is driven by the Meridian buyout and organic growth. Moreover, the bottom line surged 49.4% year over year.
Total revenues of $6.7 billion surpassed the Zacks Consensus Estimate by 3.3% and were also up 45.5% year over year.
Adjusted selling, general & administrative (SG&A) expense ratio was 7.3% in the reported quarter, down 50 basis points from 7.8% in the year-ago period.
Q1 Segmental Results
Medicaid Health Plans
As of Mar 31, 2019, membership soared 52.3% to 4.1 million. This upside was aided by the acquisition of Meridian and net organic growth.
Adjusted Medicaid Health Plans premium revenues were $4.4 billion, up 63.7% year over year, courtesy of the Meridian buyout and net organic growth.
Adjusted Medicaid Health Plans’ Medical Benefit Ratio (MBR) was 90.6% compared with 89.4% in the year-ago period, attributable to the Meridian purchase and net organic growth. However, the same was offset by the company’s operational execution to some extent.
Medicare Health Plans
As of Mar 31, 2019, Medicare Health Plans membership was 0.5 million, up 10.3% year over year, boosted by the Meridian transaction and organic growth.
Medicare Health Plans revenues of $1.8 billion increased 18.4% year over year. This was primarily on the back of the company's Meridian integration and organic growth.
MBR was 84%, flat with the prior-year quarter’s figure.
Medicare Prescription Drug Plans (PDP)
Medicare PDP membership was 1.6 million, up 51.9% year over year owing to organic growth.
MBR for the reported quarter was 89.5% compared with 88.7% in the year-earlier quarter.
Financial Update
As of Mar 31, 2019, unregulated cash and investments were $296.4 million, down 47.2% year over year.
Net cash outflow from operationsin the reported quarter was $30 millionagainst the net cash inflow of $445.7 million provided by operating activities in the prior-year period due to the timing of premium-related payments.
Days in claims payable (DCP) were 49.5 for the first quarter of 2019compared with 50.2 days in the comparable quarter last year due to lower claims inventory.
2019 Outlook
The company did not provide any financial guidance because of its pending merger with Centene (NYSE:CNC) Corporation .
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
VGM Scores
Currently, WellCare has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, WellCare has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
WellCare Health Plans, Inc. (WCG): Free Stock Analysis Report
Original post
Zacks Investment Research