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Will Covid-Led Higher Demand Aid Teladoc's (TDOC) Q3 Earnings?

Teladoc Health, Inc. TDOC is set to report third-quarter earnings on Oct 28.

The company is likely to report strong revenue outperformance for the third quarter, driven by broad-based momentum across the business and a sharp acceleration in visit-volume growth.

In the last reported quarter, the company reported a loss of 34 cents per share, wider than the Zacks Consensus Estimate of a loss of 23 cents.

However, the reported figure was narrower than the year-ago quarter’s loss of 41 cents per share. This upside was primarily owing to strong revenue growth, driven by higher demand for its telehealth services amid the COVID-19-induced market volatility.

Factors Impacting Q3 Results

Results are likely to gain from solid demand for the company’s services from clients and consumers as well as from growth InTouch Health for the third quarter. InTouch was acquired in July this year.

The ongoing pandemic sheds light on the integral role that virtual care plays within the health care system. As the market leader, the company saw a significant acceleration in demand for its services. In the first half of the year, it on-boarded nearly 15 million new paid members in the United States including 8.5 million members during the second quarter, all of which come on board under the traditional per member per month (PMPM)plus visit-fee model. This trend is likely to have continued in the to-be-reported quarter as well.

The company is also expected to have witnessed a surge in visit volumes, boosted by to greater patient satisfaction as consumers benefit from the company’s convenient, lower cost and high-quality service. Further, visits from newly-registered individuals might have shot up, indicative of more number of patients adopting the company’s virtual health care services.

Additionally, Teladoc Health is likely to report significant growth in general medical visits along with buoyant demand for specialist care including dermatology and mental health. Visit volumes grew sequentially in every month of the year, both on the business-to-business (B2B) and direct-to-consumer (DTC) sides of the business, and the trend is likely to have continued in the to-be-reported quarter too. BetterHelp (acquired in 2015), the company’s direct-to-consumer mental health offering, is also exhibiting accelerating traction, which is likely to have bumped up DTC visit volumes.

Total expenses are expected to have escalated in the quarter, primarily due to higher advertising and marketing, sales, technology and development, legal and regulatory, acquisition and integration-related costs, and general and administrative expenses.

Guidance

For the third quarter of 2020, the company expects total revenues between $275 million and $285 million, suggesting 100-107% growth from the prior-year quarter’s reported figures. Adjusted EBITDA is expected between $27 million and $31 million while net loss per share is anticipated between .35 cents and 30 cents, based on 83.4 million shares outstanding.

Earnings & Revenue Expectations   

The Zacks Consensus Estimate for Teladoc Health’s third-quarter loss of 33 cents per share indicates a 15.38% improvement from the prior-year reported number. Likewise, the consensus estimate for sales of $281.3 million suggests a 103.9% rise from the year-ago reported figure.

Earnings Surprise History

The company boasts a decent earnings surprise track. Its bottom line beat estimates in two of the last four quarters (missing the mark on the other two occasions), the average negative surprise being 9.6%. This is depicted in the chart below.

Teladoc Health, Inc. Price and EPS Surprise Teladoc Health, Inc. Price and EPS Surprise

Teladoc Health, Inc. price-eps-surprise | Teladoc Health, Inc. Quote

What Our Model Says

Our proven model does not predict an earnings beat for Teladoc Health this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. But this is not the case here.

Earnings ESP: Teladoc Health has an Earnings ESP of 0.00%.

Zacks Rank: Teladoc Health currently carries a Zacks Rank #3.You can uncover the best stocks to buy or sell before they’re reported with our  Earnings ESP Filter

Stocks That Warrant a Look

Here are some companies worth considering from the healthcare space as our model shows that these have the right combination of elements to beat on earnings in the upcoming quarterly reports:

Gilead Sciences, Inc. GILD has an Earnings ESP of +3.08% and is a Zacks #3 Ranked player at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Select Medical Holdings Corporation SEM has an Earnings ESP of +10.00% and a Zacks Rank #2, currently.

CareDx, Inc. CDNA has an Earnings ESP of +16.67% and a Zacks Rank of 2, currently.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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