On Jun 19, 2013, the shares of Humana Inc. (HUM - Analyst Report) reached a new 52-week high of $85.36. The company’s fundamental strength and strong first-quarter earnings drove the upside.
Humana has a history of generating better-than-expected operating results. The company witnessed positive earnings surprise in 8 out of the last 10 quarters.
Further, Humana reported positive earnings surprise in the last four quarters, with an average beat of 21.2%. On May 1, 2013, the company reported first-quarter 2013 net operating earnings of $407 million or $2.69 per share. The results substantially surpassed the Zacks Consensus Estimate of $1.78 as well as the year-ago earnings of $248 million or $1.49 per share.
On the same day, Humana raised its earnings guidance for 2013 to $8.40–$8.60 per share from $7.60–$7.80. The Zacks Consensus Estimate of $8.68 lies above the range, representing a year-over-year improvement of 24.14%.
Humana expects second-quarter earnings in the range of $2.40–$2.50 per share. The Zacks Consensus Estimate of $2.44 lies within this range and represents a year-over-year gain of 4.14%.
Humana has maintained a strong cash and short-term investment position over the past several years. The company has been utilizing its excess cash to repurchase shares, pay dividends or for other corporate purposes. It has also been expanding its business platform over the last several years.
Moreover, the valuation of Humana looks attractive. The shares are trading at a discount to its peers both on a price-to-book and on a forward price-to-earnings basis, while the return on equity of 15.9% is higher than the peer group average of 13.3%.The year-to-date return from the stock is 21.9%, above S&P’s return of 11.4%.
Humana currently carries a Zacks Rank #3 (Hold). Other health maintenance organizations worth considering are Molina Healthcare Inc. (MOH - Analyst Report) – Zacks Rank #1 (Strong Buy), Aetna Inc. (AET - Analyst Report) – Zacks Rank #1 (Strong Buy) and Health Net Inc. (HNT - Analyst Report) – Zacks Rank #2 (Buy).