A new year has begun -- but hold on a minute. We still haven't heard all the news from last year yet. Next up on the earnings season countdown: managed health-care provider and Motley Fool Stock Advisor pick Coventry Health Care (NYSE:CVH). The company reports earnings tomorrow before market-open.

Wall Street Wisdom:

  • General consensus. Fourteen analysts follow Coventry, with five of them rating the stock a buy, eight a hold, and one a sell.
  • Revenues. Analysts estimate that Coventry will report 19% greater revenue in Q4 2005 than it booked in Q4 2004, thanks primarily to the firm's absorption of former rival First Health last year. $1.7 billion is the combined revenue target, and it matches the firm's own projected best-case scenario, as advised in last quarter's earnings release.
  • Earnings. Profits are expected to rise in tandem, growing 19% to $0.80 per share. Note, however, that four months ago, Coventry guided investors to expect $0.81 to $0.82 per share, minus $0.03 to $0.05 in projected losses related to Hurricane Katrina. As such, the analysts seem to expect Coventry to produce more profits than it has promised.

Margin watch:
Coventry's margin trends seem to confirm that expectation. The company has consistently grown each of its rolling gross, operating, and net margins over the past 18 months. With a trailing-12-month operating margin of 12.3% and a trailing net of 7.4%, Coventry is now the envy of the HMO world, besting the last reported margins of competitors Aetna (NYSE:AET), WellPoint (NYSE:WLP), and fellow Stock Advisor recommendation UnitedHealth (NYSE:UNH).

Margins %

6/04

9/04

12/04

3/05

6/05

9/05

Gross

21.6

21.7

21.8

24

26.7

29.2

Op.

9.6

9.7

10.1

10.8

11.6

12.3

Net

5.9

6.1

6.3

6.7

7

7.4
All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ending in the named months.

Foolish lookout:
After reviewing Coventry's Q3 earnings release, my fellow Fool Stephen Simpson highlighted just a couple points of concern at Coventry. The company's Medicare and Medicaid loss ratios had deteriorated against their year-ago numbers, and membership growth was pretty slow, up just 2.5% year over year. Overall, the company seems to be doing fine -- but if you're looking for areas in which to seek signs of future improvement, these would be the places to focus.

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Fool contributor Rich Smith does not own shares of any company named above.