Will Health Net (HNT) Earnings Pull a Surprise This Season?

Health Net, Inc. HNT is set to report second-quarter 2015 earnings results on Aug 4, 2015. Last quarter, it posted a 14.49% positive earnings surprise. Let's see how things are shaping up for this announcement.

Factors Affecting the Past Quarter

Health Net continuously launches new programs and services to reach out to more customers. This is expected to boost revenues, thereby aiding bottom-line growth. Particularly, the agreement with Centura Health to provide veterans with greater access to high-value medical care is expected to fetch increased revenues for the company. Moreover, the TRICARE contract extension should help the company to continue providing TRICARE beneficiaries access to health care services till Mar 2016. This should, in turn, make a strong base for revenue generation. Also, the rollout of palliative care programs in California and Oregon should boost the bottom line. Additionally, strong capital deployment efforts are expected to lower the share count and, hence, bolster earnings per share.

However, the rate of customer attrition in health plans, a weak government contracts segment and adverse effects of the Affordable Care Act are likely to weigh on the company's financials to some extent.

Earnings Whispers

Our proven model does not conclusively show that Health Net is likely to beat estimates 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.

Zacks ESP:  Health Net has an Earnings ESP of 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at 88 cents per share.

Zacks Rank: Health Net carries a Zacks Rank #3 (Hold), which increases the predictive power of ESP. However, when combined with a 0.00% ESP, a surprise prediction becomes difficult.

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

Stocks to Consider

Here are some stocks in the health care space which, according to our model, have the right combination of elements to post an earnings beat this quarter:  

HCA Holdings, Inc. HCA has an Earnings ESP of +1.48% and a Zacks Rank #2 (Buy).

Myriad Genetics Inc. MYGN has an Earnings ESP of +2.44% and a Zacks Rank #3.

Halyard Health, Inc. HYH has an Earnings ESP of +3.70% and a Zacks Rank #3.
 

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