On Jun 14, 2014, Zacks Investment Research downgraded
) to a Zacks #4 Rank (Sell).
Why the Downgrade?
eHealth has witnessed sharp downward estimate revisions after
reporting disappointing first-quarter 2014 results. Shares of this
insurance broker have declined 12.3% since the company reported
first-quarter results to close at $36.72 in the last trading
session. Given its expected negative earnings growth rates for
full-year 2014 (25.27%), it has more downside left.
On May 1, eHealth reported first-quarter loss per share of 7 cents,
wider the Zacks Consensus Estimate by a significant 250%.
First-quarter loss also compared unfavorably with the year-ago
earnings per share of 12 cents. This deterioration was mainly due
to increase in operating costs and expenses during the quarter.
Additionally, eHealth missed the Zacks Consensus Estimate in two of
the last four quarters, with an average negative surprise of 165%.
Additionally, for full-year 2014, stock-based compensation expense
is expected to increase from 2013, which would then adversely
affect results. eHealth's expenses have been increasing for quite
some time. While expense increased nearly 24% in 2013, it rose
almost 38% in the first quarter of 2014. In fact, the rise in
expenses exceeded revenue growth in both the above-mentioned
periods. When the rise is expense is higher than that of revenues,
it leads to margin contraction. Thus, we do not expect a near-term
improvement in the stock's performance.
The Zacks Consensus Estimate for 2014 decreased 28.6% to 10 cents
per share over the last 60 days. For 2015, most of the estimates
were revised downward over the last 60 days, dragging the Zacks
Consensus Estimate by 14.9% to 40 cents per share.
Other Stocks to Consider
Not all stocks in the insurance brokerage space are performing as
poorly as eHealth. Better-ranked stocks in the same sector that
look attractive at current levels include
Erie Indemnity Company
). All these stocks have a Zacks Rank #2 (Buy).
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AON PLC (AON): Free Stock Analysis Report
ERIE INDEMNITY (ERIE): Free Stock Analysis
EHEALTH INC (EHTH): Free Stock Analysis Report
CNINSURE IN-ADR (CISG): Free Stock Analysis
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