UnitedHealth Group Inc.
) is set to report its fourth quarter and full year 2012 results
on Jan 17, before the opening bell.
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Last quarter it posted a 11.94% positive surprise. Let's see how
things are shaping up prior to the announcement.
Factors affecting the stock this Past quarter
UnitedHealth performed favorably for the past several quarters on
the back of lower-than-expected medical utilization. This quarter
may however present a different picture because of the harsh 'flu
season, which may increase the claims cost of the company,
thereby directly affecting its bottom-line earnings.
Nevertheless, other factors driving earnings would be new
customer wins from government-funded Medicare and Medicaid
coverage plans. The company health service unit - Optum is also
expected to perform well.
Our proven model does not conclusively show that UnitedHealth 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 #1 (Strong Buy) or at least Zacks
Rank #2 (Buy) or Zacks Rank #3 (Hold) for this to happen.
However, this is not the case here as elaborated below.
Zacks ESP: The Most Accurate estimate stands at $1.20 and
the Zacks Consensus Estimate also stands at the same level. There
is no difference.
Zacks #3 Rank (Hold). UnitedHealth's Zacks Rank #3 (Hold) lowers
the predictive power of ESP because the Zacks Rank #3 when
combined with a nil ESP makes surprise prediction difficult. 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.
Other Stocks to Consider
Here are some other companies to consider. With reference to our
model they have the right combination of elements to post an
earnings beat this quarter:
), Earnings ESP of +6.8% and Zacks Rank #3 (Hold)
), Earnings ESP of +2.1% and Zacks Rank #3 (Hold)
), Earnings ESP of +1.04% and Zacks Rank #3 (Hold)
UnitedHealth is considered to be the bellwether for insurance and
is the first company to kick start earnings for the health
insurance sector. Therefore, the release is going to be a
significant indicator of performance in the health insurance
sector this quarter.