Back to top

Analyst Blog

We have maintained our Neutral recommendation on Humana Inc. (HUM - Analyst Report) based on its growing membership base, organic and inorganic expansion and strong cash position, which offset the headwinds faced by the company. This health maintenance organization carries a Zacks Rank #3 (Hold).

Why Reiterate?

Humana generated positive earnings surprise in the last four quarters, with an average surprise of 21.21%. Moreover, 8 out of 11 analysts raised their 2013 earnings estimate in the last 30 days, leading to a Zacks Consensus Estimate of $8.68. This represents a year-over-year improvement of 24.14%.

Moreover, on May 1, 2013, Humana reported first-quarter 2013 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.

Moreover, with the acquisitions of Arcadian, SeniorBridge, Concentra and MD Care, Humana has increased its focus on its core business as a health care provider, expanded its Medicare coverage, enhanced the quality of its healthcare services, expanded its provider network in various regions and reduced its exposure to health care overhaul regulations. Further, the strong cash position enabled the company to increase its quarterly dividend by 3.85% in Apr 2013, after a 4% dividend hike in Apr 2012.

These positives dwarf the headwinds such as high competition and increasing expenses. Humana has been incurring higher-than-expected expenses owing to increases in operating cost along with depreciation and amortization costs. Increased benefits have also led to deteriorating benefit ratios across most operating segments. Although operating expenses inched down marginally in the first quarter of 2013, operating expenses are expected to rise in the remaining part of the year.

Other Stock to Consider

While we maintain a cautious stance on Humana, other health maintenance organizations worth considering are Aetna Inc. (AET - Analyst Report) – Zacks Rank #1 (Strong Buy), Molina Healthcare Inc. (MOH - Analyst Report) – Zacks Rank #1 (Strong Buy) and Health Net Inc. (HNT - Analyst Report) – Zacks Rank #2 (Buy).

Please login to Zacks.com or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research

Close

Are you a new Zacks Member or a visitor to Zacks.com?

Top Zacks Features

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
SYNAPTICS I… SYNA 78.11 +8.14%
CENTURY ALU… CENX 19.88 +5.74%
GREEN PLAIN… GPRE 39.41 +5.12%
PILGRIM'S P… PPC 28.82 +3.08%
THE PANTRY… PTRY 18.41 +2.79%