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Humana (HUM) Q1 Earnings to Benefit From Medicare Business
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Humana Inc.’s (HUM - Free Report) first-quarter 2018 results, scheduled to be reported on May 2 (before market open), is expected to see an increase in individual Medicare Advantage membership growth. This should be driven by better retention and strong sales during the recently completed Annual Election Period, or AEP. Market share gains in most states, with some of the company’s largest gains in Florida, Texas, Arizona and Illinois, would lead to MA business growth. Per the Zacks Consensus Estimate, Individual Medicare Avdantage membership should be 3 million, up 7.1% year over year.
This MA membership growth should drive the company’s Retail segment revenues, which are expected to be $12.2 billion, up 7%, per the Zacks Consensus Estimate. However, investments made in this segment for long-term sustainability will lower its pre-tax margin. The Zacks Consensus Estimate for income before taxes is $282 million, down 23.8% year over year.
The productivity initiatives undertaken in 2017 are expected to result in hundreds of millions of dollars of incremental savings for 2018, a portion of which will be classified as a reduction in medical costs versus operating costs. We expect to see the favorable affect of this on first quarter margins.
Humana’s pre-tax income from Healthcare Service is expected to be down in the first quarter. This will be due to three factors. First, impact from the optimization of chronic care management programs that took place throughout 2017, and second the company’s provider services business will experience lower pre-tax due to lower Medicare rates year over year in geographies where the company’s provider assets are primarily located as well as the cost of the organic build-out of its primary care assets in certain markets. Finally, this segment will bear some of the costs of the incremental investments made by the company as a result of tax reform. Per the Zacks Consensus Estimate, pre-tax income from this segment is $232 million, down 4.9% year over year.
Share repurchases made by the company should provide an extra cushion to its bottom line.
Earnings Surprise History
The company boasts an attractive earnings surprise history, having surpassed estimates in each of the trailing four quarters, with an average positive surprise of 6.96%. This is depicted in the chart below:
Our proven model indicates that chances of Humana beating the Zacks Consensus Estimate are high as it has the right combination of the two key ingredients — positive Earnings ESP and a Zacks Rank #3 (Hold) or better. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks ESP: The Earnings ESP for Humana is +0.20%.
Zacks Rank: Humana has a Zacks Rank #2 (Buy), which increases the predictive power of ESP.
Other Stocks to Consider
Here are some companies that you may consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:
Aetna Inc. has an Earnings ESP of +0.43% and a Zacks Rank #3. The company is expected to report first-quarter earnings results on May 1.
WellCare Health Plans, Inc. has an Earnings ESP of +3.15% and a Zacks Rank #2. The company is expected to report first-quarter earnings results on May 1.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
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Humana (HUM) Q1 Earnings to Benefit From Medicare Business
Humana Inc.’s (HUM - Free Report) first-quarter 2018 results, scheduled to be reported on May 2 (before market open), is expected to see an increase in individual Medicare Advantage membership growth. This should be driven by better retention and strong sales during the recently completed Annual Election Period, or AEP. Market share gains in most states, with some of the company’s largest gains in Florida, Texas, Arizona and Illinois, would lead to MA business growth. Per the Zacks Consensus Estimate, Individual Medicare Avdantage membership should be 3 million, up 7.1% year over year.
This MA membership growth should drive the company’s Retail segment revenues, which are expected to be $12.2 billion, up 7%, per the Zacks Consensus Estimate. However, investments made in this segment for long-term sustainability will lower its pre-tax margin. The Zacks Consensus Estimate for income before taxes is $282 million, down 23.8% year over year.
The productivity initiatives undertaken in 2017 are expected to result in hundreds of millions of dollars of incremental savings for 2018, a portion of which will be classified as a reduction in medical costs versus operating costs. We expect to see the favorable affect of this on first quarter margins.
Humana’s pre-tax income from Healthcare Service is expected to be down in the first quarter. This will be due to three factors. First, impact from the optimization of chronic care management programs that took place throughout 2017, and second the company’s provider services business will experience lower pre-tax due to lower Medicare rates year over year in geographies where the company’s provider assets are primarily located as well as the cost of the organic build-out of its primary care assets in certain markets. Finally, this segment will bear some of the costs of the incremental investments made by the company as a result of tax reform. Per the Zacks Consensus Estimate, pre-tax income from this segment is $232 million, down 4.9% year over year.
Share repurchases made by the company should provide an extra cushion to its bottom line.
Earnings Surprise History
The company boasts an attractive earnings surprise history, having surpassed estimates in each of the trailing four quarters, with an average positive surprise of 6.96%. This is depicted in the chart below:
Humana Inc. Price and EPS Surprise
Humana Inc. Price and EPS Surprise | Humana Inc. Quote
Why a Likely Positive Surprise?
Our proven model indicates that chances of Humana beating the Zacks Consensus Estimate are high as it has the right combination of the two key ingredients — positive Earnings ESP and a Zacks Rank #3 (Hold) or better. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks ESP: The Earnings ESP for Humana is +0.20%.
Zacks Rank: Humana has a Zacks Rank #2 (Buy), which increases the predictive power of ESP.
Other Stocks to Consider
Here are some companies that you may consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:
Teladoc, Inc. (TDOC - Free Report) is expected to report first-quarter 2018 earnings results on May 1. The company has an Earnings ESP of +3.63% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.
Aetna Inc. has an Earnings ESP of +0.43% and a Zacks Rank #3. The company is expected to report first-quarter earnings results on May 1.
WellCare Health Plans, Inc. has an Earnings ESP of +3.15% and a Zacks Rank #2. The company is expected to report first-quarter earnings results on May 1.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>