WellCare Misses Earnings Est, Sales Beat
WellCare Health Plans, Inc. ( WCG ) reported
first-quarter 2013 adjusted operating earnings of 63 cents per
share, falling significantly from $1.32 earned in the year-ago
quarter. Results also lagged the Zacks Consensus Estimate of 69
cents per share.
The year-over-year decline was due to higher medical benefit ratio
(MBR). The year over year increase in MBR resulted from lower
favorable development of prior years' medical benefits payable
recognized in the reported quarter of 2013 relative to the
prior-year period. Additionally, higher Medicare segment MBR and
change in the seasonal pattern of the Medicare Prescription Drug
Plan (PDP) segment MBR and increased flu occurrence in 2013 more
than offset the growth in premium revenue.
Including all non-recurring one-time items, WellCare reported net
income of $21.5 million or 49 cents per share, down from $51.2
million or $1.18 per share recorded in the prior-year
During the quarter under review, total revenue of WellCare grossed
$2.3 billion, surging 26% from $1.8 billion in the year-ago quarter
on the back of higher premiums, and investment and other income.
Top line also surpassed the Zacks Consensus Estimate of $2.2
Premium revenue during the quarter amounted to $2.2 billion, up
26% year over year. Total expenses for the first quarter amounted
to $2.2 billion; increasing 30.5% from the prior-year quarter,
primarily due to an increase in medical benefits expenses, selling
general and administrative expenses, Medicaid premium taxes, and
interest expense. Medical benefits expense for the first quarter
increased 31% year over year to $2 billion.
WellCare's adjusted administrative expense ratio increased 20
basis points year over year to 8.6% in the reported quarter. The
year-over-year increase was mainly due to growth initiatives which
include acquisition integration costs and also service and
technology investments. Total membership for WellCare increased 7%
year over year to about 2.7 million.
Medicaid Segment reported total premium revenue of $1.3 billion,
up 22% over the prior-year quarter owing to membership growth.
However, its MBR increased 200 basis points (bps) to 87.7% in the
first quarter of 2013.
Medicare Advantage Segment reported total premium revenue of $719
million, up 64% over the prior-year quarter. Results were driven by
acquisitions by WellCare in California and Arizona and also from
organic sales activity. MBR increased 820 bps year over year to 87%
in the first quarter of 2013.
Prescription Drug Plan Segment reported a 19% year over year
decline in premium revenues to $223 million due to a decline in
memberships and due to the effect of the 2013 bids. MBR increased
470 basis points to 103.6% in the quarter due to the enhanced
Prescription Drug Plan and greater than expected memberships in the
WellCare exited the quarter with cash and cash equivalents of
$1.38 billion compared with $1.10 billion as of Dec 31, 2012. Total
assets for the company were valued at $2.99 billion compared with
$2.68 billion as of Dec 31, 2012. Net cash from operations
increased 275.4% year over year to $31.1 million in the first
Long-term debt obligation in WellCare's books amounted to $317.5
million, up 164.6% from $120 million as of Dec 31, 2012. As of Mar
31, 2013, WellCare's stockholders' equity totaled $1.35 billion
versus $1.32 billion as of 2012-end.
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WellCare announced its adjusted net income per share guidance of
$4.60-$4.90 for 2013. The company expects premium revenue between
$8.9 billion and $9 billion. WellCare expects adjusted
administrative expense ratio in the band of 8.7%-8.9%.
Results at Other Healthcare Companies
UnitedHealth Group Inc. ( UNH ) reported its
first-quarter 2013 earnings of $1.16 per share, in line with the
Zacks Consensus Estimate. Earnings, however, declined 11.4% on a
Coventry Health Care Inc. ( CV.H ) reported
first-quarter 2013 operating earnings per share of $1.00, which
surpassed the Zacks Consensus Estimate of 79 cents as well as the
prior-year earnings of 62 cents.
WellPoint Inc. ( WLP ) reported
first-quarter 2013 adjusted income of $2.94 per share, beating the
Zacks Consensus Estimate of $2.37. Adjusted income also surpassed
the year-ago earnings of $2.34 per share by 25.6%.
WellCare carries a Zacks Rank #3 (Hold).