Humana Inc.’s (HUM - Free Report) first-quarter 2019 operating earnings per share of $4.48 beat the Zacks Consensus Estimate of $4.30 by 4.2%. The bottom line also improved 33.3% year over year. This upside can primarily be attributed to solid revenues and Medicare Advantage membership growth.
Operational Update
Revenues of $16.1 billion were up nearly 2% in the first quarter. Moreover, the top line surpassed the Zacks Consensus Estimate by 12.8%.
Adjusted consolidated pre-tax income of $803 million increased 17.4%on the back of lower-than-expected utilization in the individual Medicare Advantage business.
Benefit expense ratio expanded 130 basis points to 86.2% in the quarter.
Segmental ResultsRetail
Revenues from the Retail segment were $14.01 billion, up 16% year over year. This can primarily be attributed to robust revenues drawn from the company’s individual and group Medicare Advantage membership strength, solid per member premiums plus a rise in the state-based contracts membership.
Benefit ratio of 88.3% expanded 90 bps year over year, primarily because of the suspension of HIF in 2019 as well as the negative impact of its higher-than-expected individual Medicare Advantage membership growth.
The segment's operating cost ratio of 8.2% contracted 190 bps year over year. This was mainly owing to the suspension of HIF and operating cost efficiencies.
Group and Specialty
Revenues from the Group and Specialty segment were $1.89 billion, down 4% from the prior-year quarter due to a reduction in its fully-insured group commercial and specialty membership, impact of the contractual incentives and adjustments related to the previous TRICARE as well as lower premium revenues.
Benefit ratio expanded 320 bps year over year to 76.4%, induced by an unfavorable prior-period development in the first quarter, suspension of health insurance industry fee (HIF) and membership mix.
Operating cost ratio deteriorated 170 bps year over year to 21.9%.
Healthcare Services
Revenues of $6.10 billion increased 8% year over year, primarily owing to Medicare Advantage membership growth.
Operating cost ratio increased 40 bps year over year to 96.6% due to investments in the company’s provider services business as well as a change in mix of the pharmacy spend.
Individual Commercial
Humana exited this business effective Jan 1, 2018 and consequently, the result reflects its run-out.
Financial Update
As of Mar 31, 2019, the company had cash, cash equivalents and investment securities of $14.18 billion, up 11% from the level at 2018end.
Debt-to-total capitalization as of Mar 31, 2019 was 36%, down 140 bps from Dec 31, 2018.
Operating cash outflow totaled $896 million in the first quarter, up 155.3% year over year.
Capital Deployment
The company paid cash dividends worth $68 million in the first quarter of 2019.
Last November, it entered into an agreement to affect a $750-million accelerated share repurchase (ASR) program under its current share repurchase authorization. During the first quarter, the company bought back around 2,541,100 of its outstanding shares at average price of $295.15.
2019 Guidance
For 2019, Humana now expects adjusted EPS in the range of $17.25- $17.5, up from the prior projection of $17-$17.5.
Zacks Rank
Humana carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Among other players from the medical sector, which already reported first-quarter earnings, the bottom-line figures of Anthem Inc. , Centene Corporation (CNC - Free Report) and UnitedHealth Group Inc. (UNH - Free Report) beat the respective Zacks Consensus Estimates.
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Humana Inc.’s (HUM - Free Report) first-quarter 2019 operating earnings per share of $4.48 beat the Zacks Consensus Estimate of $4.30 by 4.2%. The bottom line also improved 33.3% year over year. This upside can primarily be attributed to solid revenues and Medicare Advantage membership growth.
Operational Update
Revenues of $16.1 billion were up nearly 2% in the first quarter. Moreover, the top line surpassed the Zacks Consensus Estimate by 12.8%.
Adjusted consolidated pre-tax income of $803 million increased 17.4%on the back of lower-than-expected utilization in the individual Medicare Advantage business.
Benefit expense ratio expanded 130 basis points to 86.2% in the quarter.
Segmental Results
Retail
Revenues from the Retail segment were $14.01 billion, up 16% year over year. This can primarily be attributed to robust revenues drawn from the company’s individual and group Medicare Advantage membership strength, solid per member premiums plus a rise in the state-based contracts membership.
Benefit ratio of 88.3% expanded 90 bps year over year, primarily because of the suspension of HIF in 2019 as well as the negative impact of its higher-than-expected individual Medicare Advantage membership growth.
The segment's operating cost ratio of 8.2% contracted 190 bps year over year. This was mainly owing to the suspension of HIF and operating cost efficiencies.
Group and Specialty
Revenues from the Group and Specialty segment were $1.89 billion, down 4% from the prior-year quarter due to a reduction in its fully-insured group commercial and specialty membership, impact of the contractual incentives and adjustments related to the previous TRICARE as well as lower premium revenues.
Benefit ratio expanded 320 bps year over year to 76.4%, induced by an unfavorable prior-period development in the first quarter, suspension of health insurance industry fee (HIF) and membership mix.
Operating cost ratio deteriorated 170 bps year over year to 21.9%.
Healthcare Services
Revenues of $6.10 billion increased 8% year over year, primarily owing to Medicare Advantage membership growth.
Operating cost ratio increased 40 bps year over year to 96.6% due to investments in the company’s provider services business as well as a change in mix of the pharmacy spend.
Individual Commercial
Humana exited this business effective Jan 1, 2018 and consequently, the result reflects its run-out.
Financial Update
As of Mar 31, 2019, the company had cash, cash equivalents and investment securities of $14.18 billion, up 11% from the level at 2018end.
Debt-to-total capitalization as of Mar 31, 2019 was 36%, down 140 bps from Dec 31, 2018.
Operating cash outflow totaled $896 million in the first quarter, up 155.3% year over year.
Capital Deployment
The company paid cash dividends worth $68 million in the first quarter of 2019.
Last November, it entered into an agreement to affect a $750-million accelerated share repurchase (ASR) program under its current share repurchase authorization. During the first quarter, the company bought back around 2,541,100 of its outstanding shares at average price of $295.15.
2019 Guidance
For 2019, Humana now expects adjusted EPS in the range of $17.25- $17.5, up from the prior projection of $17-$17.5.
Zacks Rank
Humana carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Among other players from the medical sector, which already reported first-quarter earnings, the bottom-line figures of Anthem Inc. , Centene Corporation (CNC - Free Report) and UnitedHealth Group Inc. (UNH - Free Report) beat the respective Zacks Consensus Estimates.
Biggest Tech Breakthrough in a Generation
Be among the early investors in the new type of device that experts say could impact society as much as the discovery of electricity. Current technology will soon be outdated and replaced by these new devices. In the process, it’s expected to create 22 million jobs and generate $12.3 trillion in activity.
A select few stocks could skyrocket the most as rollout accelerates for this new tech. Early investors could see gains similar to buying Microsoft in the 1990s. Zacks’ just-released special report reveals 7 stocks to watch. The report is only available for a limited time.
See 7 breakthrough stocks now>>
Zacks Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>
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