8 Managed Care Stocks To Watch In Earnings Season

In a recent report, analysts at Morgan Stanley previewed first quarter earnings for the managed care industry. The firm expects results broadly in-line with consensus, on average, for most names in the space, except Molina Healthcare, Inc. (NYSE: MOH).

Among diversified managed care companies, the note said, UnitedHealth Group Inc. (NYSE: UNH) seemed best-positioned to outperform in the first quarter. (The multi-billion dollar company reported earnings on Thursday morning, and beat consensus EPS and revenue estimates.)

The report also states that “the sell-side may be slightly mis-modeling Anthem Inc (NYSE: ANTM)'s seasonality” -- the analysts sit $0.04 above the Street (see estimates below).

They also think Aetna Inc (NYSE: AET) has “the toughest Y/Y comp after recognizing $0.45 of favorable benefits including lower flu, lower utilization due to weather, and favorable development in 1Q14.”

Separately, Morgan Stanley likes the panorama for the Medicaid names in the first quarter, “as some of the 2014 pressure areas like HCV and FL costs appeared to have improved in 4Q. That said, Medicaid MCOs did cite potentially higher flu costs in 1Q,” which the firm is watching.

As seen below, Centene Corp (NYSE: CNC), CIGNA Corporation (NYSE: CI), Humana Inc (NYSE: HUM) and WellCare Health Plans, Inc. (NYSE: WCG) are also mentioned.

Analysts also highlight five key focus areas for first quarter earnings calls:

1. “The potential for large scale M&A including diversified combinations and diversified/Medicaid deal”

2. “Contingency plans if SCOTUS decision rules against the Administration”

3. Fiscal 2016 “final MA Rate notice and MA cost trend expectations”

4. New demographics and exchange lives

5. “PBM optionality in light of OptumRx/CTRX deal”