What happened
Shares of eHealth (EHTH 6.22%) were skyrocketing 27.3% as of 3:28 p.m. EDT on Friday. The online health insurance exchange operator announced its second-quarter results after the market closed on Thursday. As you might have guessed, those results were very good.
The company reported Q2 sales of $65.8 million, more than double the total posted in the prior-year period and well above Wall Street's consensus estimate of $41.65 million. eHealth also announced adjusted earnings per share of $0.10. This reflected a significant improvement from the net loss of $0.40 per share in the second quarter of 2018. It was also much better than the $0.36-per-share loss expected by analysts.
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So what
When a company tops Wall Street quarterly estimates, it often gets a nice bump in its share price. But eHealth didn't just beat analysts' estimates for Q2; it trounced them. The company's results were so much better than expected that it's perfectly understandable why investors were so excited.
eHealth's Medicare segment revenue jumped 105% year over year to $52.3 million. Sales from individual, family, and small business policies increased by 88% from the prior-year period to $13.5 million.
The only negative in the company's Q2 update was a net loss of $5.8 million, or $0.25 per share, on a generally accepted accounting principles (GAAP) basis. But even that result was better than it seemed. eHealth stated that the loss stemmed from a noncash charge of $7.2 million related to an increase in the fair value of the earn-out liability assumed with its acquisition of GoMedigap. This change in fair value, though, resulted from the big jump in eHealth's share price.
Thanks to its home run in Q2, eHealth upped its full-year 2019 guidance -- a move that made investors even happier. The company now projects revenue in 2019 will be between $365 million and $385 million. eHealth previously guided for full-year revenue of $315 million to $335 million. The company also now expects full-year 2019 adjusted earnings per share (EPS) between $1.77 and $1.97, a nice boost from its previous outlook of adjusted EPS of $1.54 to $1.73.
Now what
It seems likely that eHealth will continue to enjoy strong sales growth. The company stands to benefit as more Americans become eligible for Medicare.
There is one big risk for eHealth, however. Several presidential candidates are advocating a single-payer healthcare system in the U.S. If significant progress is made toward actually implementing a single-payer system, eHealth and all other health insurance stocks would plunge.
