Healthcare: Consensus Too Bearish?

Takeaway: Improving fundamentals and depressed expectations is leading to a bullish set-up in Healthcare stocks.

This is an excerpt of a note that was originally published May 16, 2013 at 09:44 in Healthcare

 

 

We had been vocal about our expectations for weakness in 1Q13, which was evidenced by the majority of companies in our Healthcare index missing 1Q13 consensus revenue estimates, and also the most annual revenue guidance cuts occurring in the first quarter in the last 5 years.

 

However, we’ve also been suggesting an improving fundamental setup moving forward; mainly due to the utilization drivers listed below, but also because the externality setup (weather/working days) reverses from a headwind in 1Q13 to tailwind for the remainder of the year; particularly in 2Q13 (see link below for more detail).  These utilization drivers are coming up against consensus estimates/management guidance that have generally declined following a tough 1Q13 earnings season.

 

That combination of improving fundamentals against depressed expectations makes us incrementally more bullish heading into 2Q13 earnings season. 

 

 

2013 Utilization Drivers

  1. Physician Utilization
  2. Maternity
  3. Deferred Care
  4. Externality Tailwinds 

 


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