Health Net, Inc. (HNT) is set to report fourth-quarter and full-year 2014 earnings results on Feb 10th, 2015. Last quarter, it posted a 2.74% positive earnings surprise. Let us see how things are shaping up for this announcement.
Factors Affecting the Past Quarter
During the last quarter Health Net undertook initiatives that are expected to boost top line and thereby earnings. Initiatives like offering a network of community-based specialty health care providers through California Department of Corrections and Rehabilitation (CDCR) and expanding its services with the Department of Veterans Affairs (VA) are noteworthy in this regard. Additionally, strong capital deployment efforts are expected to lower share count, bolstering earnings per share.
However, the rate of customer attrition in the health plans, a weak government contracts segment and adverse effects of the Affordable Care Act are headwinds.
Earnings Whispers?
Our proven model does not conclusively show that Health Net is likely to beat estimates this quarter. That is because a stock needs to have both a positive Earnings ESP 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: Health Net has an ESP of -1.75%. This is because both the Most Accurate estimate stands at 56 cents while the Zacks Consensus Estimate is pegged at 57 cents per share.
Zacks Rank: Health Net carries a Zacks Rank #3 (Hold) which increases the predictive power of ESP; but when combined with a -1.75% ESP, it makes surprise prediction difficult.
We caution against Sell-rated stocks (Zacks Rank #4 and 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks to Consider
Here are some stocks in the medical sector which, according to our model, our model have the right combination of elements to post an earnings beat this quarter:
Actavis plc (ACT) has an Earnings ESP of +4.38% and a Zacks Rank #2 (Buy).
Lifepoint Hospitals Inc. (LPNT) has an Earnings ESP of +3.96% and a Zacks Rank #2 (Buy).
Molina Healthcare, Inc. (MOH) has an Earnings ESP of +6.67% and a Zacks Rank #3.
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