Will WellPoint (WLP) Beat Earnings Again? - Analyst Blog

WellPoint Inc. WLP is set to report first-quarter 2014 results on April 30, 2014. Last quarter, it posted a 1.16% surprise. Let's see how things are shaping up for this announcement.

Factors This Past Quarter

In the first quarter, WellPoint has been upfront in taking up initiatives that would strengthen its capacities as a healthcare service provider. Among these initiatives, the collaborations with Healthways, Inc. HWAY and American Academy of Pediatrics in Feb 2014 are worth a special mention. Moreover, to focus on core operations, WellPoint divested its online contact lens retail subsidiary, 1-800 CONTACTS and glasses.com.

Toward making its services more accessible to its members, WellPoint adopted the Web Content Accessibility Guidelines (WCAG) version 2.0 level AA as its accessibility standard during the quarter. However, increasing medical cost experience raises concern.

Earnings Whispers?

Our proven model does not conclusively show that WellPoint is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank of #1, 2 or 3 for this to happen. That is not the case here as you will see below.

Zero Zacks ESP:  That is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at $2.12 per share, making the difference 0.00%.

Zacks Rank #2 (Buy): WellPoint's Zacks Rank #2 increases the predictive power of ESP, but when combined with a zero ESP, it makes surprise prediction difficult.

We caution against stocks with Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing zero or negative estimate revisions momentum.

Other Stocks to Consider

Here are some other companies you may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:  

MedAssets, Inc. MDAS with Earnings ESP of +3.45% and Zacks Rank #2.

Humana Inc. HUM with Earnings ESP of +1.55% and Zacks Rank #3 (Hold).