(HUM - Analyst Report)
United States is moving towards
healthcare for all. All Americans will
pay into a system organized and mandated by our government called The
Protection and Affordable Care Act (aka ObamaCare). Whether
you believe the plan is right or
wrong for America, companies like Humana will reap the rewards from
and lower care costs.
though insurance providers like
Humana have been trending higher, there may be more momentum left in
Company Description &
Humana offers a lineup of healthcare related services, with their main
being group health insurance.
other lines of business serve
the military, individuals, seniors, and many others. Products
include various specialty products
to employers, including dental, group life, workers' compensation,
administrative services to those who self-insure their employee health
services will be an integral
part of ObamaCare (Medicare
and Medicaid specifically), but initially,
they were the loudest in opposition to the law.
Weird huh? But the proof is in
average operating profit margins of healthcare companies like Humana
8.24 percent since the overhaul became law, compared with 6.88 percent
for the year
and a half before it was passed.
average, healthcare insurers saw
earnings leap almost 30% from Q4 2008 to Q4 2011 according to a
study. Industry analysts are estimating that Medicare revenue may rise by as much as $10
billion by 2015 as more baby boomers retire.
addition to the macro
fundamentals, Humana has been making higher highs and higher lows
August and is trading at relatively cheap multiples here.
Humana is a large-cap company (14.9 billion) that is trading at about
times trailing earnings (P/E). Looking forward, Zacks
is estimating that number dropping to 11.1, with no change in price
rose to a Zacks Rank 1 Strong
Buy on the 19th of January from a rank of 2.
It has been bouncing between buy and strong buy since November.
reported a 0.2% quarterly sales
increase at their last earnings report on October 31, 2011.
saw year over year sales growth
of 10.40% and a 26% rise in earnings per share in the same period with
sales of roughly 34 billion in FY2010. Humana is expected to
in FY2011 according to the Zacks Consensus Estimate.
We saw several analysts revise next quarter’s earnings estimates up
past month. In addition, upward revisions came from several
analysts to current
year and next year’s estimates ahead of their report on February 6th.
are for Humana to make
$1.19 this quarter. Of the 15 analysts who cover the health
consensus is for the company to grow earnings by 17.5% in FY2011 and to
see a 5%
reduction to earnings in FY2012.
terms of the magnitude of analyst
estimate trends, we are seeing all of the consensus estimates higher
were 90 days ago from current quarter, out to FY 2012. This
bodes well for sentiment among the
analysts and makes a bullish case for Humana.
beat estimates last quarter
by 25.74%, with the average earnings surprise being a positive 40% over
past year. They have beat estimates consistently
over the past 12
Market Performance &
The chart for Humana is bottom left to top right, minus the correction
we had during
the summer of 2011. A recent pullback should give would-be
chance to scoop up shares at a reasonable entry around the $91 level.
has remained above its 50 day
moving average since October 20th. The stock
recently made a new 52 week
high of $96.46 just before the most recent retracement.
stock is also firmly above its 200
day moving average of $79.57, which can be used as long term support
stock. It only breached that level twice in the past 15
months and didn’t
stay below it for long.
has outpaced the S&P 500
by 55.75% over the past year, but lagged behind the index by 1.5% over
month. It also outperformed the S&P by 3% over the
past 90 days.
looks to be a relatively low
priced stock (on a valuation basis) with strong momentum characteristics.
A Levy is the Momentum Stock
Strategist for Zacks.com. He is also the Editor in charge of the
Whisper Trader Service.