Aetna Inc. becomes on Tuesday the latest health insurer to report second-quarter results in what has been a rocky earnings season so far for the sector.
WHAT TO WATCH FOR: Aetna competitor WellPoint Inc. said Wednesday its second-quarter earnings dropped more than 8 percent, and it cut its earnings forecast for the year. WellPoint said it lost enrollment as employers cut jobs and consequently trimmed the number of people covered by their insurance in the quarter.
The insurer also lowered its guidance after it saw costs come in about $50 million higher than it expected in May. Analysts and investors will be watching to see if any of these trends repeat with Aetna.
Another health insurer, UnitedHealth Group Inc., also reported cost increases when it released second-quarter results last week. But UnitedHealth said its earnings grew more than 5 percent, and it raised its full-year outlook.
The price of WellPoint shares sank 12 percent Wednesday after the earnings report, and shares of other insurers, including Aetna, also fell.
Aetna's stock also sank in late April, after the insurer said its first-quarter profit fell 13 percent in a performance that missed Wall Street expectations. The insurer said in late June it expects second-quarter adjusted earnings, which exclude capital gains or losses, to be lower than the $1.34 per share it recorded in the first quarter.
Aetna's Medicaid business suffered a blow last month when Ohio officials awarded contracts for business in that state to Centene Corp. and Molina Healthcare Inc., but not Aetna, reversing their earlier decision. Medicaid is the state-federal program that provides coverage for the needy, aged and disabled.
Aetna, based in Hartford, Conn., projects full-year operating earnings of about $5 per share. Analysts surveyed by FactSet expect, on average, earnings of $5.04 per share.
WHY IT MATERS: Aetna is the third-largest health insurer, trailing only WellPoint and UnitedHealth in both enrollment and revenue. Aetna's results will help give analysts a better sense for how managed care companies are handling cost increases and competition for new business.
Aetna provides health insurance for about 17.9 million people. It also sells dental, group life and disability coverage.
WHAT'S EXPECTED: Analysts expect earnings of $1.25 per share on $8.75 billion in revenue.
LAST YEAR'S QUARTER: Aetna's 2011 second-quarter earnings climbed 9 percent in part because it benefited from slower growth in the use of healthcare services, a trend that helped several insurers last year. Aetna earned $536.7 million, or $1.39 per share, on $8.34 billion in revenue.
Its performance topped Wall Street expectations, and it raised its earnings forecast for 2011.
Source: http://news.yahoo.com/earnings-preview-aetna-reports-2q-tuesday-190825480--finance.html
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