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Humana (HUM) Likely to Beat Q1 Earnings: Stock to Gain?

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We expect Humana Inc. (HUM - Free Report) to beat expectations when it reports first-quarter 2017 results on May 3, before the market opens.

Why a Likely Positive Surprise?

Our proven model shows that Humana has the right combination of two key ingredients to beat estimates.

Zacks ESP: Earnings ESP of the company +3.14%. This is because the Most Accurate estimate is pegged at $2.63, while the Zacks Consensus Estimate stands at $2.55. A positive ESP is a meaningful indicator of a likely positive earnings surprise for the company. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Humana carries a Zacks Rank #3 (Hold). Note that stocks with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 have a significantly higher chance of beating on earnings.

Conversely, the Sell-rated stocks (#4 or 5) should never be considered going into an earnings announcement. 

Humana Inc. Price and EPS Surprise

What is Driving the Better-Than-Expected Earnings?

Humana’s Individual Medicare Advantage, the Group Medicare Advantage and Healthcare Services businesses are likely to have seen improvement in the first quarter.

Per management, standalone PDP (Prescription Drug Plans) membership might have added to the Medicare business.

However, operating expenses are expected to be on the higher side. This is due to higher benefit expenses that put pressure on margins.

Continuing the trend of the past quarters, Individual commercial membership is expected to remain a drag due to the rise in premiums along with benefit redesigns in place since the beginning of 2016.

The public exchange business might have contained the trend of underperformance in the first quarter as well.

The blocked merger with Aetna Inc that went through numerous regulatory procedures is likely to increase legal expenses, thus putting pressure on the bottom line in the first quarter.

Stocks to Consider

Here are some companies from the medical sector that you may want to consider as these have the right combination of elements to post an earnings beat this quarter:

ABIOMED, Inc. , which is expected to report first-quarter earnings on May 4, has an Earnings ESP of +6.06% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Adaptimmune Therapeutics PLC. (ADAP - Free Report) has an Earnings ESP of +30.77% and a Zacks Rank #3. The company is expected to report first-quarter earnings on May 8.

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Humana Inc. (HUM) - free report >>

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