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WellCare Beats Earnings in Q2 - Analyst Blog

Posted
8/8/2013 10:35:00 AM
By: Zacks.com
Referenced Stocks:HNT;HUM;WCG;WLP

WellCare Health Plans, Inc. ( WCG ) reported second-quarter 2013 adjusted operating earnings of $59.2 million or $1.35 per share, beating $54.5 million or $1.24 per share earned in the year-ago quarter. Results also surpassed the Zacks Consensus Estimate of $1.24 per share.

The year-over-year increase was due to higher premium revenues and lower adjusted administrative expense ratio, partly offset by the increase in WellCare's medical benefit ratio (MBR).

Including all non-recurring one-time items, WellCare reported net income of $46.9 million or $1.07 per share, inching up from $46.4 million or $1.06 per share recorded in the prior-year quarter.

Operational Update

During the quarter under review, total revenue of WellCare grossed $2.33 billion, surging 28.8% from $1.81 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 $2.27 billion. Premium revenues during the quarter amounted to $2.3 billion, up 29% year over year.

Total expenses for the first quarter amounted to $2.25 billion; up 30.1% from the prior-year quarter, primarily due to an increase in medical benefits expenses, selling general and administrative expenses, Medicaid premium taxes, depreciation and amortization, and interest expense. Medical benefits expense for the second quarter increased 30% year over year to $2 billion.

WellCare's adjusted administrative expense ratio declined 10 basis points year over year to 8.1% in the reported quarter. The year-over-year decline was mainly due to higher efficiency and improved operating leverage, partly offset by investments in growth and service initiatives. Total membership for WellCare increased 11% year over year to about 2.8 million.

Segment Details

Medicaid Segment reported total premium revenue of $1.4 billion, up 26% over the prior-year quarter owing to membership growth. However, its MBR declined 170 basis points (bps) to 87.5% in the second quarter of 2013.

Medicare Advantage Segment reported total premium revenue of $760 million, up 67% over the prior-year quarter. Results were driven by acquisitions by WellCare in California and from organic sales activity. MBR increased 320 bps year over year to 86.5% in the second quarter of 2013.

Prescription Drug Plan Segment 's premium revenues fell 28% year over year to $185 million. The downside was attributable to a decline in memberships as well as the effect of the 2013 bids. MBR increased 1040 basis points to 90.5% in the quarter.

Financial Position

WellCare exited the quarter with cash and cash equivalents of $1.2 billion compared with $1.1 billion as of Dec 31, 2012. Total assets for the company were valued at $3.03 billion compared with $2.68 billion as of Dec 31, 2012. Net cash from operations increased 183% year over year to $133 million in the second quarter.

Long-term debt obligation in WellCare's books amounted to $308 million, up 156.7% from $120 million as of Dec 31, 2012. As of Jun 30, 2013, WellCare's stockholder equity totaled $1.40 billion versus $1.32 billion as of 2012-end.

Outlook for 2013

WellCare announced its adjusted net income per share guidance of $4.70-$4.90 for 2013. The company expects premium revenues between $9.15 billion and $9.25 billion.  WellCare expects adjusted administrative expense ratio of about 8.7%.

Results at Other Healthcare Companies

Another health maintenance organization (HMO), WellPoint Inc. ( WLP ) reported second-quarter 2013 adjusted income of $2.60 per share, beating the Zacks Consensus Estimate of $2.08. Adjusted income also surpassed the year-ago earnings of $2.04 per share by 27.5%.

Health Net Inc. 's ( HNT ) second-quarter 2013 operating income, which comprises combined net earnings from the Western Region Operations and Government Contracts segments, came in at $41.4 million or 52 cents per share, improving from the year-ago quarter's earnings of $15.9 million or 19 cents per share. Operating income was in line with the Zacks Consensus Estimate.

Humana Inc. 's ( HUM ) second-quarter 2013 operating earnings came in at $420 million or $2.63 per share. The results substantially surpassed the Zacks Consensus Estimate of $2.46 as well as the year-ago earnings of $356 million or $2.16 per share.

Zacks Rank

WellCare carries a Zacks Rank #2 (Buy).



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