2011 Potpourri XVIII, Earnings Calls

Usually companies’ earnings calls are filled with pre-scripted and bland mush, but occasionally nuggets can be gleaned.  The first quarter reporting season is underway and here are a few summaries.

One has to be impressed with the sheer size of UnitedHealth Group, revenues are now anticipated to be over $100 billion with cash flow north of $6 billion.  That is astounding when you think about it, as is the number of people the company claims to touch with one or another of its various products.  The company said that the main driver on medical cost inflation was unit price increases, particularly in inpatient services and it was working to mitigate those.  UNH appears to be positioning the non-health coverage businesses for potential spinoff, or at least trying to get a stock pop by making people think it might do that.   (UNH Transcript)

Express Scripts is one of the three big prescription benefit managers.  These companies have generally had good growth and nice stock runs, but the juice may be running out.  ESI had already lowered first quarter expectations and did not have revenue or profit growth consistent with past years.  They experienced both lower customer growth and lower drug utilization.  The company said it is still seeing substantial brand drug price increases, with lesser pressure from generics, particularly multi-source generics.  Still a lot of blather about their behavior change orientation, not clear what that actually does for trend.   (ESI Transcript)

Abbott is a very diversified health product company–branded and generic drugs, medical devices, nutritionals and diagnostics.  This diversity appears to have facilitated a very good start to 2011, with better than expected revenue and earnings growth.  In the competitive stent world, its product is faring very well.  Abbott claims to have some branded drugs in the pipeline which will spur growth in the next couple of years.  Emerging markets are an increasingly important source of revenues.  Noticeable by their absence were any questions about the effects of reform in the US.  (ABT Transcript)

Johnson & Johnson has always been a company with an almost pristine reputation with consumers, but recalls and factory problems, as well as financial performance issues, have shaken that perception in recent months.  Overall growth in the company was rather slow, although branded pharmaceuticals had modest growth.  This is an extremely diverse, and one suspects unwieldy, company, without a clear common thread or apparent strategy to its businesses.  J & J continues to be an active acquiror, further muddying its overall structure.  The CEO did not even participate on the earnings call.  The one item of note is that the company has seen price pressure for many of its products, pressure which is likely to increase as most countries try to further control health spending.  (JNJ Transcript)

WellPoint is another large multi-line health plan company, and like UnitedHealth, had a stellar quarter, with good growth, and raised its forward expectations.  WellPoint highlighted growth in national accounts, where the Blues plans overall have a strong presence.  Contributing to the good results were lower than expected health costs and the company says it is continuing to try to control unit price increases, particularly from hospitals.  While utilization had been generally flat, the company said it was expecting overall cost trend to still be in the 7.5% range.  (Wellpoint Transcript)