Humana Keeps Humming Along

Humana (HUM - Analyst Report) is one of the largest publicly traded health benefit companies in the U.S. and Puerto Rico. The company recently reported better-than-expected first quarter net income of $80.2 million (up 13% year over year), or EPS of $0.47, compared with net income of $71.2 million, or EPS of $0.42 in the first quarter a year ago.

We believe previously disclosed issues of mispriced premiums and co-payments for its "enhanced" Medicare prescription-drug benefit plan are being addressed, as reflected by management's upward revision of FY08 EPS guidance, and retain our Buy recommendation at current levels. On May 23, 2008, HUM announced the completion of its purchase of OSF HealthPlans, Inc., a Peoria, Ill.-based managed care company, from OSF Saint Francis, Inc. The acquisition is not expected to have any effect on Humana's earnings guidance for 2008 diluted earnings per common share.

We have valued HUM on a forward price/earnings (P/E) basis, as well as a comparison to similar firms in the managed care sector. Our $56 price target is derived using a P/E multiple of 12.9 times (x) FY08 EPS of $4.35.

Read the full analyst report on HUM.