eHealth (EHTH) Expects to Incur Net Loss in Q4, Shares Down

eHealth, Inc. EHTH has announced its preliminary results for the fourth quarter and 2017. The company expects to incur loss for both the time periods. Shares of the company lost about 0.34% at the trading session on Jan 16.

eHealth projects net loss between $22.5 million and $23.5 million for the fourth quarter on revenues of $39 million to $40 million. Adjusted EBITDA is estimated to be negative, in the range of $18.3 million to $19.3 million. The Zacks Consensus Estimate loss is pegged at $1.24 on revenues of $37.5 million. Both the bottom and top line translate into a year over year decrease of 57% and 14% respectively. Revenues fell shy of the company’s expectations.

For the full year, eHealth tightened the revenue guidance to a range of $172.5 to $173.5 million from $165 to $175 million guided earlier.  Net loss is expected to be in the range of $27 million to $28 million compared with prior guidance of loss of $27.8 million to $28.8 million. Adjusted EBITDA is projected to be negative, in the range of $14.5 million to $15.5 million. The company earlier projected Adjusted EBITDA to be negative, in the range of $14.1 million to $16.1 million

On its third-quarter earnings call, the company stated that as the fourth quarter is considered a primary selling season, it expects improvement in Medicare submitted application. The company noted that the submitted applications for all its Medicare products grew 16% year over year in the fourth quarter. For 2017, the same increased 10% year over year, falling shy of the management’s expectation of growth in high-teens, attributable to slower-than-expected roll-out of selected partner relationships relative to plan.

The company noted that submitted applications for individual and family plan products declined 23% year over year in the fourth quarter of 2017 while for 2017, the same decreased 51% year over year. This downside was attributable to the challenging individual and family market during the Open Enrollment Period of the fourth quarter.

Shares of eHealth have outperformed the industry in a year.  While the stock has surged 42.4%, the industry has rallied 17.3%. However, the company has not witnessed any earnings momentum for 2018 estimates. Also, the company delivered a positive earnings surprise only in one of the last three reported quarters.

 

 

eHealth is scheduled to report fourth-quarter earnings on Mar 1. Our proven model does not conclusively show that the company is likely to beat estimates. This is because a Zacks Rank #4 (Sell), which lowers the predictive power of ESP, combined with an Earnings ESP of 0.00% makes surprise prediction difficult. Note that we always need a positive ESP and a favorable Zacks Rank to be confident about an earnings surprise.

eHealth focuses on shifting business mix toward a higher percentage of long-term value. Its Medicare customers will ensure a better future cash-flow generation and will position the company well for long-term growth.

Stocks to Consider

Some better-ranked stocks from the insurance industry are Brown & Brown Inc. BRO, Arthur J. Gallagher & Co. AJG and Prudential Financial, Inc. PRU.

Brown & Brown markets and sells insurance products and services, primarily in the United States as well as in England, Bermuda and the Cayman Islands. The company delivered positive surprises in the last four quarters with an average beat of 4.31%. The stock sports a Zacks Rank #1 (Strong Buy).   You can see the complete list of today’s Zacks #1 Rank stocks here.   

Arthur J. Gallagher  provides insurance brokerage and risk management services in the United States and internationally. The company pulled off positive surprises in three of the last four quarters with an average beat of 1.85%. The stock carries a Zacks Rank #2 (Buy).

Prudential provides insurance, investment management and other financial products and services in the United States and internationally. The company came up with positive surprises in three of the last four quarters with an average beat of 0.16%. The stock carries a Zacks Rank of 2.

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