Can UnitedHealth (UNH) Keep its Earnings Streak Alive?

Health insurer UnitedHealth Group Inc. (UNH) is scheduled to report its third-quarter 2014 results before the opening bell on Oct 16.

In the last quarter, this company delivered a 13.6% positive earnings surprise. The average beat for the trailing four quarters is 5.1%.

Will UnitedHealth deliver a positive earnings surprise this quarter as well? Let's see what factors might have influenced the earnings report this time around.

Q3 Flashback

Earnings in the quarter will be primarily driven by Medicaid growth, steadily strengthening Medicare and international performance, and a fiercer entry into new, more-established public exchange market and continued strong growth and earnings momentum at the company’s health service segment – Optum.

However, other factors such as nondeductible insurance taxes, Affordable Care Act prescribed Medicare Advantage funding pull backs and commercial underwriting changes will drag third-quarter earnings.

Earnings Whispers

Our proven model does not conclusively show that UnitedHealth is likely to beat the Zacks Consensus Estimate in the third quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy) or at least 2 (Buy) or 3 (Hold) for this to happen. But this is not the case here as elaborated below.

Zacks ESP: UnitedHealth’s Most Accurate estimate is pegged at $1.52 per share, which is lower than the Zacks Consensus Estimate of $1.53 per share. The Earnings ESP is thus -0.7%.

Zacks Rank: UnitedHealth has a Zacks Rank #3 (Hold). Though Zacks Rank #1, 2 or 3 increases the predictive power of ESP, the company’s ESP of -0.7% makes surprise prediction difficult.

Stocks to Consider

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

Assurant Inc. (AIZ) Earnings ESP of +6.1% and Zacks Rank #3.

Humana Inc. (HUM) Earnings ESP of +1.5% and a Zacks Rank #3.

Torchmark Corp. (TMK) Earnings ESP of +1.0% and a Zacks Rank #3.