Looking at our custom HRM Indices, you can see the relative performance for the S&P 500 versus Medicare Exposure and Domestic Revenue. It appears that consensus moves lower for 2012 and 2013 were too aggressive and explain the bounce off the June lows as you can see in the chart.
A few other important themes worth noting here include:
- Results are coming in weaker across companies particularly those with exposure to Europe.
- Regarding our Physician Utilization theme, and a 2H12 recovery, the theme appears delayed but intact, the important point to keep in mind is that Q3 reports reflect softness we saw across our datasets through the summer.
- Medicare outperformance remains, but has been the biggest relative loser over the last few weeks, coinciding with Romney’s election odds rising.
- Healthcare has been a relative outperformer into broader market declines, but the current set up is neutral.
- Beat-Miss: 2Q12 was the ugliest quarter in aggregate for reported topline growth vs. consensus since 1Q09 for both Healthcare and SPX constituent companies. The beat-miss ratio for 3Q12 is currently running ~40%/60% for the broader market. Given the significant & expedited drawdown in estimates post 2Q12, missing or barely beating conservative & already deflated estimates is not a particularly bullish growth signal.
