WellPoint Inc. (WLP) is set to report third-quarter 2014 earnings results on Oct 29, 2014. Last quarter, it delivered an earnings surprise of 7.02%. Let us see how things are shaping up for this announcement.
Factors Affecting the Past Quarter
WellPoint’s strong membership is expected to help the company come up with improved earnings. The ACA-driven expansion and the recent RFP wins in Florida, Kentucky, Georgia and California are particularly expected to help in this regard.
However, significant general and administrative costs related to the Health Insurance Provider (HIP) fee and a high financial leverage raises some concern.
Earnings Whispers?
Our proven model does not conclusively show that WellPoint is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP (Expected Surprise Prediction) and a Zacks Rank of #1, 2 or 3 for this to happen. That is not the case here as you will see below.
Zacks ESP: WellPoint has an ESP of -0.88%. This is because the Most Accurate estimate stands at $2.25 per share while the Zacks Consensus Estimate is pegged at $2.27 per share, making the difference -0.88%.
Zacks Rank: WellPoint’s Zacks Rank #3 (Hold) increases the predictive power of ESP. However, we need to have a positive ESP to be confident about an earnings beat.
We caution against stocks with Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.
Stocks to Consider
Here are some companies in the healthcare services space you may consider, as our model shows that they have the right combination of elements to post an earnings beat this quarter:
AmSurg Corp. (AMSG) has Earnings ESP of +18.52% and a Zacks Rank #1 (Strong Buy).
Charles River Laboratories International, Inc. (CRL) has Earnings ESP of +1.25% and a Zacks Rank #1.
Medivation, Inc. (MDVN) has Earnings ESP of +13.46% and a Zacks Rank #1.
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