Bear of the Day: WebMD (WBMD)

Through its public portals consisting of desktop and mobile offerings, the company provides personalized online healthcare information to consumers on its flagship site, WebMD.com. Revenue is generated primarily through advertisements and sponsorship agreements from pharmaceutical and health and wellness companies.

Through its private portals, like Medscape.com, WebMD offers health management applications for employers and health plans, and generates revenue typically on a per participant basis.

Earnings Roll Over

I last wrote about WebMD in June after another strong quarterly report boosted analyst EPS estimates. The Zacks Rank caught a nice 30% move in shares in the first half of the year from $50 to $65.

But their Q2 report disappointed these same analysts, continuing a trend of lowered estimates that began in July.

In the past two months, the full-year 2016 consensus slipped from $1.88 to $1.82 and 2017 profit projections took a bigger hit, dropping from $2.19 to $2.02. And that's why the shares of WBMD fell to the cellar of the Zacks Rank this month.

That 8% fall in EPS also brings the growth outlook to just 10.6% for next year, and that probably concerned investors the most after this year's 20%+ growth. That would explain the drop in shares from $67 to $51 since that late May peak.

Taking Expertise & Access to a New Level

While the stock is on uncertain ground right now, it's worth reviewing the positive development I noted in June...

On May 17, WebMD announced a new initiative. ColumbiaDoctors and Medscape, the leading source of medical news and information for physicians, would create a partnership that gives physicians using Medscape Consult access to the expertise of ColumbiaDoctors, Columbia University Medical Center's faculty practice.

More than 25 health professionals from ColumbiaDoctors representing specialties including oncology, hematology, endocrinology, and surgery will serve as Medscape chief editors and associate editors on Medscape Consult, Medscape's innovative peer-to-peer, point-of-care digital platform. Accessible to physicians worldwide, the Medscape Consult editors will respond to questions, share best practices, and offer expert perspectives.

Renowned experts in their respective specialties, ColumbiaDoctors will provide the Medscape Consult community with evidence-and practice-based insights into patient care, closely aligning with their basic and clinical research.

"Our new partnership with Medscape enables ColumbiaDoctors to share their insights and perspective with a global physician community facing rapidly shifting clinical concerns," said John Chabot, MD, chief of the Division of GI/Endocrine Surgery, Columbia University Medical Center, and vice president of ColumbiaDoctors.

It sounds like WebMD intends to maintain and grow its superior platforms for health professionals and consumers. But until the estimate picture turns around, it may be best to stand aside. The Zacks Rank will let you know when the turnaround is on.

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