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Analysis

Winners, Losers, and Notable Healthcare Performers in Q3

By Jack O'Brien  
   November 08, 2018

As earnings season wraps up, the lines between the winners, losers, and those in the middle have become more apparent.

This week marks the end of healthcare's earnings season for Q3 2018, and with it comes reflection on how insurers and for-profit hospital operators fared during the second half of the year.

In a robust economy, some companies managed to excel past earnings posted this time last year, growing both membership and operations.

Some, however, struggled to produce a strong balance sheet and narrowed their year-end financial outlook accordingly.

As 2018 draws to a close, healthcare companies are already looking ahead and making moves to best position themselves for success in 2019 and beyond.

Related: Winners and Losers from Healthcare's Q2 Earnings Season

Below is a list of healthcare's winners and losers from the 2018 Q3 earnings season:

WINNERS:

UnitedHealth Group

  • Leading the way for another quarter is the Minnetonka-based insurer, with 12% year-over-year growth in revenues and 28.2% for adjusted net earnings from operations.
  • Cash flows from operations reached $900 million and adjusted cash flows topped $6 billion in Q3.
  • Subsidiary UnitedHealthcare added 2.8 million more members compared to Q3 2017, with earnings from operations growing 7% in the same period of time.
  • Similarly, Optum grew its earnings from operations by 11% to $25.4 billion.

Centene Corp.

  • The St. Louis-based insurer continued its banner year through Q3, adding 2.1 million managed care members to eclipse quarter-over-quarter and year-over-year growth.
  • Centene achieved cash flows from operations of $548 million after posting negative cash flows in Q2.
  • While moving into the New York State market in Q3, total revenues reached $16.2 billion, up 36% year-over-year.  

CVS Health/Aetna Inc.

  • The major development during Q3 was that the proposed megamerger received approval from the Department of Justice and is slated to close by Thanksgiving.
  • Aetna recorded a net income of $1 billion and saw its adjusted EPS rise 21% year-over-year.
  • Meanwhile, CVS had net revenues up 2.4%, net income increase 8.4%, and pharmacy revenues up 2.6% as it improved its year-end guidance.
  • Both CVS CEO Larry Merlo and Aetna CEO Mark Bertolini said their respective companies are entering the megamerger with solid financials.

MIDDLE:

Universal Health Services

  • Q3 featured a strong effort from UHS but the hospital management company just barely missed its estimated quarterly revenue of $2.66 billion by $10 million.
  • UHS revenues were down $30 million compared to Q2 but up year-over-year, while the company beat its EPS estimates for the quarter by 10.4% with $2.23 per share.
  • All in all, UHS narrowed its year-end financial guidance to a range between $9.25 to $9.60.

LifePoint

  • It's been a busy week-and-a-half at LifePoint since producing Q3 earnings.
  • The shareholders approved a $5.6 billion merger with RCCH HealthCare Partners but denied a $120 million golden parachutes package for four executives.
  • However, LifePoint's board approved the golden parachutes just days later.
  • As for Q3 earnings, it was a mixed bag: revenues were up $1.5 billion thanks to increases in admissions, but there was also a $40.1 million loss in the aggregate. 

WellCare

  • The Tampa-based insurer posted growth in some areas while sliding in others during Q3.
  • The positive: total revenues increased 14.9% year-over-year, Medicaid health plans revenue jumped 18.4%, year-end financial guidance boosted to a range of $10.90 to $11.
  • The negative: EPS dropped compared to Q3 2017, net income margin fell from 3.9% to 2.3% year-over-year, and unregulated cash and investments slipped from $514.8 million to $462.6 million in one quarter.
  • Also, the company added former Louisian Gov. Bobby Jindal to its board in September. 

LOSERS:

Community Health Systems

  • Another quarter marked another round of substantial losses for the rural hospital operator.
  • With losses of $325 million in Q3, CHS tripled its net losses compared to what it was this time last year.
  • Revenues fell 5.9% year-over-year, EPS dropped $2.88, and admissions fell 2.3% on a same-store basis.
  • Still, CEO Wayne T. Smith said he is "encouraged by the momentum" the company's strategic initiatives are showing. 

Tenet Healthcare

  • The Dallas-based for-profit hospital operator slipped into losses after a decent showing in Q2.
  • Tenet produced $9 million in losses, a $33 million swing compared to Q2, with net revenues sliding 2.7% to $3.7 billion.
  • Even a slight rise in adjusted admissions was undone by hospital diverstitures throughout the quarter.
  • Tenet CEO Ronald Rittenmeyer expressed his disappointment, saying the company's hospitals "did not meet our expectations."

Molina Healthcare

  • After taking a positive step forward in Q2, Long Beach-based Molina experienced decreases in net income and EPS during Q3.
  • Premium revenues fell by 4% to $177 million, while net income totalled $197 million which was down from $202 million in Q2.
  • Despite faltering in a few metrics, Q3 was still an improvement for Molina compared to the company's dismal 2017, culminating an improved financial guidance to show for it.

Jack O'Brien is the finance editor at HealthLeaders. 


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