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Analysis

Cigna, Molina, and Teladoc Among Healthcare's Winners and Losers in Q3

By Jack O'Brien  
   November 07, 2019

Publicly-traded healthcare companies are heading into the last quarter of 2019 with significant momentum.

Health insurers produced strong financial statements during Q3, though some for-profit provider organizations weren't too far behind. 

Some familiar faces continued to produce consistent results: UnitedHealth, Cigna, and CVS Health, but Teladoc Health impressed with rising revenues and a smaller net loss than in previous quarters.

Meanwhile, Magellan Health, Molina Healthcare, and Encompass Health struggled to keep pace heading into the final quarter of 2019.

Below is a list of healthcare's winners and losers from the Q3 earnings season:

Winners:

Cigna Corp.

  • The Bloomingfield, Connecticut–based insurer's adjusted revenues were $35.8 billion, more than triple compared to the same metric this time last year. 

  • As has been the case for most of 2019, Cigna cited its megamerger with Express Scripts Holding Co. as a major contributing factor to the company's strong financials, specifically in the medical and pharmacy cost performance during Q3. 

  • "Our combination with Express Scripts enables us to leverage industry leading capabilities and more rapidly innovate to enhance clinical and cost outcomes for those we serve," David Cordani, CEO of Cigna, said in a statement.


UnitedHealth Group

  • The Minnetonka, Minnesota–based health insurer achieved total quarterly revenues exceeding $60 billion, a 7% year-over-year increase.
     
  • UnitedHealth's operating earnings rose 9% year-over-year, cash flows from operations hit $12.3 billion, and net earnings per share reached $3.67, an increase of 17% compared to Q3 2018. 
     
  • On the whole, UnitedHealth reported a $5 billion profit during the quarter.
     

Related: UnitedHealth, CHS Among Healthcare Winners and Losers in Q2


Cerner Corp.

  • The Kansas City–based health information technology company grew its revenue 7% year-over-year and recorded GAAP net earnings of $169.4 million. 

  • Additionally, Cerner reported an operating cash flow of $351.4 million with a free cash flow of $174.4 million.

  • Looking ahead, Cerner projects its Q4 revenue will be between $1.41 billion and $1.46 billion, while its adjusted diluted earnings per share will between $0.73 and $0.75. 
     

Teladoc Health

  • Teladoc Health saw its total revenues rise for yet another quartering, nearly reaching $138 million, but also benefited from a reduction in its net loss.

  • Revenues increased 24% year-over-year, boosted by a 27% increase in U.S. subscription access fees revenues and a 25% increase in visit fee revenues from U.S. paid visits.

  • "As we close out the year, we are confident in our positive momentum and are raising revenue and visit guidance for the full year," Jason Gorevic, CEO of Teladoc, said in a statement. "Our results serve as yet another affirmation of the expanding role of virtual care globally, and our proven ability to execute at scale."


CVS Health

  • The highlight of Q3 for CVS Health was securing final judicial approval for its nearly $70 billion acquisition of Aetna in September. 
     
  • The Woonsocket, Rhode Island–based company posted an adjusted operating income of $3.9 billion, an increase of nearly 49%, with an adjusted earnings per share (EPS) of $1.84, up $0.11 compared to Q3 2018.
     
  • CVS notched total revenues of $64.8 billion in Q3, up 36.5% year-over-year, and has raised its year-end financial guidance.


Middle:

Community Health Systems

  • One year after posting a $325 million net loss, Community Health Systems (CHS) reported a $17 million loss in Q3.
     
  • The Franklin, Tennessee–based for-profit hospital operator saw revenues decline nearly 6% to $3.2 billion, while its adjusted EBITDA reached $388 million, a $16 million improvement year-over-year.
     
  • While admissions took a step back during the quarter, sliding 9.2% while adjusted admissions fell 8.4%, the company's income from operations totaled $184 million, an increase of 148.6% year-over-year.
     

Tenet Health Corp.

  • The Dallas–based for-profit hospital operator doubled its adjusted net income to $61 million in Q3 but saw its net loss reach $233 million.
     
  • The company also completed a $4.2 billion debt refinancing, increasing its borrowing capacity by $1.5 billion.
     
  • Despite shedding three hospitals year-over-year, Tenet's total admissions increased 1.1% during that period of time.
     

Losers:

Magellan Health

  • The company appointed Kenneth Fasola as its new chief executive officer (CEO), who will replace outgoing CEO Barry Smith.
     
  • This marks the second quarter in a row that Magellan has announced a leadership change ahead of its earnings report, which was again marked by declines in numerous financial metrics.
     
  • The Scottsdale–based for-profit managed care company's net revenue slipped by 1.3% year-over-year while net income fell 21.6% and earnings per share (EPS) dropped by 21.1%.
     

Molina Healthcare

  • The Long Beach, California–based insurer's premium revenues totaled just over $4 billion, a 5.8% decrease year-over-year; net income fell by $22 million from $197 million to $175 million; and its earnings per diluted share (EPS) slipped down to $2.75. 
     
  • Part of Molina's EPS decline was due to a $2 million charge on the repayment of convertible notes. 
     
  • The insurer now projects its full-year EPS in a range between $11.30 to $11.55, eclipsing the previous guidance of $11.20 to $11.50.
     

Encompass Health

  • While net operating revenues rose nearly 9% year-over-year, Encompass Health's cash flows from operating activities fell by more than 42%.
     
  • One quarter after its adjusted free cash flow grew by 28%, Encompass' adjusted free cash flow fell by almost 24% to $109.6 million. The company attributed this decline to an increase in working capital.
     
  • Outpatient and other net operating revenues declined by 20.2%.

Jack O'Brien is the finance editor at HealthLeaders, a Simplify Compliance brand.


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