Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

Humana's Government Business Impresses, High Costs A Drag

Published 09/20/2016, 11:31 PM
Updated 07/09/2023, 06:31 AM

On Sep 21, 2016, we issued an updated research report on Humana Inc. (NYSE:HUM) .

The Kentucky-based company is one of the largest health care plan providers in the United States. Last year, this internationally renowned insurer made it to the headlines due to its proposed acquisition by Aetna Inc (NYSE:AET). The merger, if successful, would have resulted in the formation of the second-largest managed care company in the nation. However, the future of the deal remains shrouded in uncertainty given the objection raised by the U.S department of Justice (DOJ).

Humana has been witnessing strong performances in Individual Medicare Advantage and Healthcare Services businesses over last few quarters. Consequently, it raised its guidance for the full year. Adjusted earnings per share for 2016 are now expected to be at least $9.25. Its Medicare business has also been outperforming over the past few years, primarily due to the operating initiatives that have started bearing fruit through favorable prior period medical claims development and lower current-year utilization.

Humana’s financial strength is backed by its solid cash balance. Effective control on debt financing also helped Humana manage its capital. The company’s focus on creating shareholders’ value through several capital deployment activities helped it cement investors’ confidence and drive long-term growth.

Nevertheless, Humana’s public exchange business continues to remain weak. This has compelled it to curtail the sale of Affordable Care Act (ACA) plans and halt the expansion of the business. The company’s group Medicare Advantage business has also been affected by low revenues and earnings due to its failure in overcoming the loss incurred on a large profitable account at the beginning of this year.

Moreover, Humana’s Individual commercial membership has been adversely impacted by the sudden increases in premiums as well as benefit redesigns effective since the start of this year. As a result, Humana now anticipates membership of this segment to decrease by 200,000 to 300,000.

The continuous increase in operating, depreciation and amortization costs that has resulted in higher benefit ratios is another headwind for the company.

Zacks Rank and Stocks That Warrant a Look

Humana currently carries a Zacks Rank #3 (Hold).

Investors can also look at some better ranked stocks from the same space like WellCare Health Plan Inc (NYSE:WCG) , UnitedHealth Group Inc (NYSE:UNH) and The Joint Corp (NASDAQ:JYNT) . All of these stocks carry Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Confidential from Zacks

Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>



HUMANA INC NEW (HUM): Free Stock Analysis Report

UNITEDHEALTH GP (UNH): Free Stock Analysis Report

WELLCARE HEALTH (WCG): Free Stock Analysis Report

JOINT CORP/THE (JYNT): Free Stock Analysis Report

Original post

Zacks Investment Research

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.