) is scheduled to report its second-quarter 2014 results before the
opening bell on Jul 29.
In the last quarter, this health insurer delivered a 26.9% positive
earnings surprise. The average beat for the trailing four quarters
Will Aetna deliver a positive earnings surprise this quarter as
well? Let's see what factors might have influenced the
earnings report this time around.
Why a Likely Positive Surprise?
Our proven model shows that Aetna is likely to beat earnings in its
upcoming release because it has the right combination of key
, which represents the difference between the Most Accurate
estimate and the Zacks Consensus Estimate, is +2.48%. This is a
meaningful and leading indicator of a likely positive earnings
surprise for this company.
Aetna carries a Zacks Rank #2 (Buy). The stocks with Zacks Ranks of
#1, 2 and 3 have a significantly higher chance of beating earnings.
The Sell rated stocks (#4 and 5) should never be considered going
into an earnings announcement.
The combination of Aetna's Zacks Rank #2 and +2.48% ESP make us
confident of an earnings beat.
What is Driving Better-than-Expected Earnings?
Second-quarter earnings at Aetna is not likely to have been driven
by any particular factor but by a host of growth measures
undertaken over the past several months. Aetna's earnings will be
helped by a disciplined focus on cost control and growth of
well-managed care organizations - the accountable care
organizations - expansion in government programs, such as Medicare
for the elderly and Medicaid for the poor as well as continued
accretion from Coventry acquisition (closed last year).
The quarters' results will also benefit from higher enrollment
expected in commercial self-insured membership as well as continued
sign up on private exchanges.
Aetna's use of capital for share buyback will provide an extra
cover to earnings.
However, other factors such as nondeductible insurance taxes,
Affordable Care Act prescribed Medicare Advantage funding pull
backs and commercial underwriting changes could dampen
second-quarter earnings growth to some extent.
Other Stocks to Consider
Here are some other companies in the health care space worth
considering as our model shows that these have the right
combination of elements to post an earnings beat this quarter.
WellPoint Inc. (
) has an earnings ESP of +3.97% and carries a Zacks Rank #2 (Buy).
WellCare Health Plans, Inc. (
) has an earnings ESP of +3.47% and carries a Zacks Rank #3.
Cigna Corp. (
) has an earnings ESP of +2.16% and carries a Zacks Rank #3.
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WELLPOINT INC (WLP): Free Stock Analysis Report
AETNA INC-NEW (AET): Free Stock Analysis Report
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WELLCARE HEALTH (WCG): Free Stock Analysis
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