On Thursday, Deutsche Bank adjusted its outlook on agilon health Inc (NYSE:AGL), reducing the price target to $4.00 from the previous $5.00 while maintaining a Hold rating on the company's stock. The adjustment followed agilon health's second-quarter earnings report, which revealed a revenue shortfall.
The company posted total revenue of $1.48 billion, a 38% increase year-over-year but still below the consensus estimate of $1.56 billion and Deutsche Bank's expectation of $1.55 billion. The discrepancy in revenue was largely attributed to retroactive contract cancellations, which did not impact the medical margin.
Agilon health's Medicare Advantage (MA) membership grew by 38% year-over-year to 513,000, aligning with the lower end of the guidance range. This growth was tempered by delays in signing new payer contracts. The medical margin for the quarter was reported at $106 million, at the lower spectrum of the company's guidance, due to a higher than anticipated 7.3% cost trend for Q2. Management indicated a modest sequential decline in in-patient utilization but anticipates continued elevated cost trends.
The company's visibility and reporting lag compared to its Managed Care Organization (MCO) partners were highlighted as ongoing issues, with agilon's visibility estimated to be 40-60 days behind larger MCOs. This lag raises concerns that agilon might not yet be fully aware of accelerating cost trends that peers such as CVS and Humana (NYSE:HUM) have noted. Despite the revenue miss, agilon health reported better-than-expected adjusted EBITDA figures, with a loss of $2.8 million compared to the anticipated $7.9 million loss forecasted by analysts. This was primarily due to efficient operational cost management and timing differences related to new partner incentive payments.
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