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Humana (HUM) Tops Q1 Earnings and Revenues, Lifts Guidance
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Humana Inc.’s (HUM - Free Report) first-quarter 2018 operating earnings per share of $3.36 beat the Zacks Consensus Estimate of $3.21. The bottom line also improved 22.2% year over year.
The company benefited from Medicare Advantage enrollment growth, solid segmental performances, lower taxes as well as a favorable impact of share buybacks.
Operational Update
Revenues of $14.3 billion were up nearly 6% on higher Retail revenues from the company’s Medicare Advantage business plus Group and Specialty segment. Moreover, the top line surpassed the Zacks Consensus Estimate of $14.2 billion.
Adjusted consolidated pre-tax income of $384 million declined 8.9%, primarily due to lower earnings in the company’s Retail and Healthcare segments. This was partially offset by higher earnings in the Group and Specialty segment. The prior-year quarter also benefited from net gain associated with terminated merger agreement.
Benefit ratio deteriorated 40 basis points to 84.9% in the reported quarter.
Operating cost ratio deteriorated 70 basis points to 12.4%.
Segment Results
Retail
Revenues from the Retail segment were $12.1 billion, up 6% year over year, primarily owing to higher revenues from the company’s Medicare Advantage business resulting from increased membership.
Benefit ratio of 87.4% improved 70 bps year over year, primarily owing to reinstatement of the non-deductible health fee.
The segment’s operating cost ratio of 10.1% deteriorated 170 bps year over year.
Adjusted pre-tax income was $273 million, down 27% year over year.
Group and Specialty
Revenues from the Group and Specialty segment were $1.97 billion, up 5% from the prior-year quarter, primarily backed by higher stop loss premiums related to small group level funded accounts, stronger service revenues and higher per member premiums.
Benefit ratio improved 240 bps year over year to 73.2% owing to the impact of the reinstatement of the health insurance industry fee.
Operating cost ratio deteriorated 200 bps year over year to 23.6%.
Adjusted pre-tax income of $212 million increased 23% year over year, driven by the company’s higher earnings related to fully insured business.
Healthcare Services
Revenues of $5.7 billion decreased 5% year over year, primarily due to exit from individual commercial business, lower Pharmacy Solutions intersegment revenues and lower revenues from provider service business.
Operating cost ratio deteriorated 70 bps year over year to 96.2%.
Adjusted pre-tax income for the segment was $196 million, down 23% due to optimization process associated with the company’s chronic care management program and higher operating cost ratio.
Individual Commercial
Humana exited this business effective Jan 1, 2018 and thus, the result reflects run out of this business.
The company witnessed a pre-tax gain of $53 million, down 15.9% year over year.
Financial Update
As of Mar 31, 2018, the company had cash, cash equivalents and investment securities of $20.96 billion, up 28% from 2017-end level.
As of Mar 31, 2018, cash and short-term investments held by the parent company were $567 million, down 18% from 2017-end level.
Debt-to-total capitalization as of Mar 31, 2018 was 33.9%, up 60 bps from Dec 31, 2017.
Operating cash flow totaled $351 million, down from $1.1 billion in the year-ago quarter.
Dividend and Share Repurchase Update
The company did not buy back any shares in the quarter under review and has worth $2 billion remaining under its repurchase authorization.
The company paid cash dividends worth $57 million.
2018 Guidance Raised
Humana expects adjusted earnings per share in the range of $13.70- $14.10, up from $13.50-$14, guided earlier. GAAP EPS is projected between $13.54 and $13.94, up from the previous forecast of $13.16 and $13.66.
Total revenues are anticipated in the band of $55.8-$56.4 billion.
Cash flow from operations is estimated between $2.2 billion and $2.6 billion while capital expenditure is likely to be between $500 and $600 million.
Among other players in the HMO industry that have reported first-quarter earnings, the bottom line of Centene Corp. (CNC - Free Report) , Anthem Inc. and UnitedHealth Group Inc. (UNH - Free Report) beat the respective Zacks Consensus Estimate.
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Humana (HUM) Tops Q1 Earnings and Revenues, Lifts Guidance
Humana Inc.’s (HUM - Free Report) first-quarter 2018 operating earnings per share of $3.36 beat the Zacks Consensus Estimate of $3.21. The bottom line also improved 22.2% year over year.
Humana Inc. Price, Consensus and EPS Surprise
Humana Inc. Price, Consensus and EPS Surprise | Humana Inc. Quote
The company benefited from Medicare Advantage enrollment growth, solid segmental performances, lower taxes as well as a favorable impact of share buybacks.
Operational Update
Revenues of $14.3 billion were up nearly 6% on higher Retail revenues from the company’s Medicare Advantage business plus Group and Specialty segment. Moreover, the top line surpassed the Zacks Consensus Estimate of $14.2 billion.
Adjusted consolidated pre-tax income of $384 million declined 8.9%, primarily due to lower earnings in the company’s Retail and Healthcare segments. This was partially offset by higher earnings in the Group and Specialty segment. The prior-year quarter also benefited from net gain associated with terminated merger agreement.
Benefit ratio deteriorated 40 basis points to 84.9% in the reported quarter.
Operating cost ratio deteriorated 70 basis points to 12.4%.
Segment Results
Retail
Revenues from the Retail segment were $12.1 billion, up 6% year over year, primarily owing to higher revenues from the company’s Medicare Advantage business resulting from increased membership.
Benefit ratio of 87.4% improved 70 bps year over year, primarily owing to reinstatement of the non-deductible health fee.
The segment’s operating cost ratio of 10.1% deteriorated 170 bps year over year.
Adjusted pre-tax income was $273 million, down 27% year over year.
Group and Specialty
Revenues from the Group and Specialty segment were $1.97 billion, up 5% from the prior-year quarter, primarily backed by higher stop loss premiums related to small group level funded accounts, stronger service revenues and higher per member premiums.
Benefit ratio improved 240 bps year over year to 73.2% owing to the impact of the reinstatement of the health insurance industry fee.
Operating cost ratio deteriorated 200 bps year over year to 23.6%.
Adjusted pre-tax income of $212 million increased 23% year over year, driven by the company’s higher earnings related to fully insured business.
Healthcare Services
Revenues of $5.7 billion decreased 5% year over year, primarily due to exit from individual commercial business, lower Pharmacy Solutions intersegment revenues and lower revenues from provider service business.
Operating cost ratio deteriorated 70 bps year over year to 96.2%.
Adjusted pre-tax income for the segment was $196 million, down 23% due to optimization process associated with the company’s chronic care management program and higher operating cost ratio.
Individual Commercial
Humana exited this business effective Jan 1, 2018 and thus, the result reflects run out of this business.
The company witnessed a pre-tax gain of $53 million, down 15.9% year over year.
Financial Update
As of Mar 31, 2018, the company had cash, cash equivalents and investment securities of $20.96 billion, up 28% from 2017-end level.
As of Mar 31, 2018, cash and short-term investments held by the parent company were $567 million, down 18% from 2017-end level.
Debt-to-total capitalization as of Mar 31, 2018 was 33.9%, up 60 bps from Dec 31, 2017.
Operating cash flow totaled $351 million, down from $1.1 billion in the year-ago quarter.
Dividend and Share Repurchase Update
The company did not buy back any shares in the quarter under review and has worth $2 billion remaining under its repurchase authorization.
The company paid cash dividends worth $57 million.
2018 Guidance Raised
Humana expects adjusted earnings per share in the range of $13.70- $14.10, up from $13.50-$14, guided earlier. GAAP EPS is projected between $13.54 and $13.94, up from the previous forecast of $13.16 and $13.66.
Total revenues are anticipated in the band of $55.8-$56.4 billion.
Cash flow from operations is estimated between $2.2 billion and $2.6 billion while capital expenditure is likely to be between $500 and $600 million.
Zacks Rank and Performance of Other Players
Humana carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Among other players in the HMO industry that have reported first-quarter earnings, the bottom line of Centene Corp. (CNC - Free Report) , Anthem Inc. and UnitedHealth Group Inc. (UNH - Free Report) beat the respective Zacks Consensus Estimate.
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
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