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Healthcare Stocks Q4 Earnings to Watch on Jan 31: AET, HCA
Zacks Equity Research
Updated

The Q4 earnings season is at its peak with as many as 106 S&P 500 members set to release their quarterly results this week.So far, 170 S&P 500 members comprising 33.9% of the index’s total market capitalization have reported Q4 results. Per the latest Earnings Preview (dated Jan 27, 2017), total earnings for these companies increased 6% due to 3.1% growth in revenues, both on a year-over-year basis. While 64.1% companies beat the bottom-line estimate, 54.7% posted better-than-expected revenues.

Healthcare under the Medical sector is one of the seven sectors in the S&P 500 group. So far, 25.9% of the total Medical sector companies have reported fourth-quarter results. The sector is expected to deliver 2.9% earnings growth on 5.4% higher revenues in the fourth quarter.

Healthcare is part of the broader medical sector which includes diversified industries like health maintenance organizations (HMOs) popularly known as health insurers, clinical, laboratories and diagnostics research, medical equipment, hospitals, telehealth services and more.

In the HMO subsector, factors like a disappointing public exchange business, an increasing medical ratio, and the robust government business will be majorly affect the earnings of the players. Most insurers incurred losses from this business in the first nine months of the year and the trend is unlikely to reverse this quarter.

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 has 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 fourth quarter. However, this upside might have been partly offset by a decline in membership on the public exchange business.

Here, we take a sneak peek at two healthcare stocks scheduled to report fourth-quarter figures on Jan 31:

Stocks to Watch for Earnings on Jan 31

Aetna Inc.’s AET results will largely reflect its continued strong performance in the Government business (Medicare and Medicaid) and focus on operating costs which will be to some extent offset by losses sustained in its ACA compliant products.

Within Aetna’s Government business, the performance of its Medicare business continues to be strong. Its solid membership growth in Medicare Advantage speaks of the execution of its growth strategy in Medicare. The company’s Medicaid business has also performed well so far this year and the trend is expected to continue in the fourth quarter too.

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