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Humana Inc. (HUM - Free Report) is bucking the market downturn in 2022, with the health insurance powerhouse continually hitting fresh highs.
Humana stock posted another new all-time high on Wednesday as Wall Street searches high and low for companies thriving during 40-year high inflation and the ongoing economic uncertainty.
Humana’s near-term bull case and its long-term potential both hinge on some rather large-scale societal trends that are hard to bet against. Healthcare needs never stop and the U.S. spends a ton of money on healthcare for a population that’s growing older and increasingly unhealthy, which fits directly into Humana’s core business.
Humana Basics
Humana is a health insurance firm that offers a wide range of plans for Medicare, Medicaid, dental, vision, and pharmacy. The company’s bread-and-butter segment is Medicare Advantage. Humana’s total Medicare Advantage enrollment hit roughly 5.1 million last quarter, up 4.5% YoY, with its smaller Medicare stand-alone PDP down 2% at 3.6 million.
Humana reportedly holds about 18% of the entire Medicare Advantage enrollment across the country, coming in second behind UnitedHealthcare’s 28%. Medicare Advantage, which is a more private sector-based alternative vs. Medicare, is projected to account for roughly half of all Medicare enrollment within the next few years.
Despite its success and market share, Humana is focused on expanding its reach and is set to spend $1 billion to fund growth and investment in its Medicare Advantage business in 2023.
Image Source: Zacks Investment Research
Near-Term Growth Prospects
Humana averaged 12% sales growth in the past four years, as part of a steady 20-year run. Zacks estimates call for HUM’s revenue to climb 12% in 2022 to reach $92.90 billion, up from $83.06 billion last year. The company is then projected to post another 9% sales growth in FY23.
The Medicare giant’s adjusted earnings are expected to climb by 21% this year and another 12% next year. Better still, HUM executives once again raised the firm’s 2022 guidance in the middle of September and flexed its stability by targeting a 14% CAGR for earnings through 2025. Plus, it projected “continued earnings growth in 2026 and beyond at or above the EPS growth trends reflected in our new mid-term target.”
Humana’s positive earnings revisions activity helps it land a Zacks Rank #1 (Strong Buy) right now. HUM has also managed to top our EPS estimates for five years running, including a 13% beat in Q2 and an 18% beat in the first quarter of 2022.
Image Source: Zacks Investment Research
Long-Term Healthcare Trends
Humana executives projected that over 42% of the eligible Medicare-age population enrolled in a Medicare Advantage plan in 2021, or roughly 27 million out of around 63 million people. Other industry-tracking groups project this figure will reach 50% within a few years as people look for more holistic offerings.
More broadly, millions more people will age into the group of those 65 or older who qualify for Medicare offerings. The total U.S. population of those 65 or older is projected to reach nearly 72 million by 2030 and almost 90 million by 2050.
The aging population brings with it more medical issues, and 6 in 10 American adults already have a chronic disease. On top of that, total U.S. healthcare spending is projected to grow at an average annual rate of 5.4% to reach $6.2 trillion by 2028, up from $4.1 trillion in 2020.
Image Source: Zacks Investment Research
Other Fundamentals
HUM shares have surged 620% in the last 10 years vs. its industry’s 85% and the S&P 500’s 190%. This includes a 16% climb in 2022 that helped it high fresh highs on Wednesday. Humana has, of course, destroyed the market and outclimbed the broader Zacks Medical Sector’s 21% drop and its industry’s 8% gain.
Humana trades near its five-year median at 19.3X forward 12-month earnings and at a discount vs. its Econ Sector’s 21.3X and its Medical – HMOs industry’s 20.5X.
Humana boasts an impressive balance sheet, with around $18 billion in cash and equivalents to help reach a total of $27 billion in current assets and $47 billion in total assets vs. $31 billion in total liabilities.
In terms of income generation, Humana’s 0.60% dividend yield is nothing special. That said, the company has plenty of room to grow its dividend, with a 14% payout ratio at the moment. And it has already raised its dividend six times in the last five years, for an annualized growth rate of 24%.
Bottom Line
At the moment, 12 of the 17 brokerage recommendations Zacks has are “Strong Buys,” alongside two “Buys,” and nothing below a “Hold.” Plus, its Medical – HMOs segment sits in the top 15% of over 250 Zacks industries.
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Bull of the Day: Humana Inc. (HUM)
Humana Inc. (HUM - Free Report) is bucking the market downturn in 2022, with the health insurance powerhouse continually hitting fresh highs.
Humana stock posted another new all-time high on Wednesday as Wall Street searches high and low for companies thriving during 40-year high inflation and the ongoing economic uncertainty.
Humana’s near-term bull case and its long-term potential both hinge on some rather large-scale societal trends that are hard to bet against. Healthcare needs never stop and the U.S. spends a ton of money on healthcare for a population that’s growing older and increasingly unhealthy, which fits directly into Humana’s core business.
Humana Basics
Humana is a health insurance firm that offers a wide range of plans for Medicare, Medicaid, dental, vision, and pharmacy. The company’s bread-and-butter segment is Medicare Advantage. Humana’s total Medicare Advantage enrollment hit roughly 5.1 million last quarter, up 4.5% YoY, with its smaller Medicare stand-alone PDP down 2% at 3.6 million.
Humana reportedly holds about 18% of the entire Medicare Advantage enrollment across the country, coming in second behind UnitedHealthcare’s 28%. Medicare Advantage, which is a more private sector-based alternative vs. Medicare, is projected to account for roughly half of all Medicare enrollment within the next few years.
Despite its success and market share, Humana is focused on expanding its reach and is set to spend $1 billion to fund growth and investment in its Medicare Advantage business in 2023.
Image Source: Zacks Investment Research
Near-Term Growth Prospects
Humana averaged 12% sales growth in the past four years, as part of a steady 20-year run. Zacks estimates call for HUM’s revenue to climb 12% in 2022 to reach $92.90 billion, up from $83.06 billion last year. The company is then projected to post another 9% sales growth in FY23.
The Medicare giant’s adjusted earnings are expected to climb by 21% this year and another 12% next year. Better still, HUM executives once again raised the firm’s 2022 guidance in the middle of September and flexed its stability by targeting a 14% CAGR for earnings through 2025. Plus, it projected “continued earnings growth in 2026 and beyond at or above the EPS growth trends reflected in our new mid-term target.”
Humana’s positive earnings revisions activity helps it land a Zacks Rank #1 (Strong Buy) right now. HUM has also managed to top our EPS estimates for five years running, including a 13% beat in Q2 and an 18% beat in the first quarter of 2022.
Image Source: Zacks Investment Research
Long-Term Healthcare Trends
Humana executives projected that over 42% of the eligible Medicare-age population enrolled in a Medicare Advantage plan in 2021, or roughly 27 million out of around 63 million people. Other industry-tracking groups project this figure will reach 50% within a few years as people look for more holistic offerings.
More broadly, millions more people will age into the group of those 65 or older who qualify for Medicare offerings. The total U.S. population of those 65 or older is projected to reach nearly 72 million by 2030 and almost 90 million by 2050.
The aging population brings with it more medical issues, and 6 in 10 American adults already have a chronic disease. On top of that, total U.S. healthcare spending is projected to grow at an average annual rate of 5.4% to reach $6.2 trillion by 2028, up from $4.1 trillion in 2020.
Image Source: Zacks Investment Research
Other Fundamentals
HUM shares have surged 620% in the last 10 years vs. its industry’s 85% and the S&P 500’s 190%. This includes a 16% climb in 2022 that helped it high fresh highs on Wednesday. Humana has, of course, destroyed the market and outclimbed the broader Zacks Medical Sector’s 21% drop and its industry’s 8% gain.
Humana trades near its five-year median at 19.3X forward 12-month earnings and at a discount vs. its Econ Sector’s 21.3X and its Medical – HMOs industry’s 20.5X.
Humana boasts an impressive balance sheet, with around $18 billion in cash and equivalents to help reach a total of $27 billion in current assets and $47 billion in total assets vs. $31 billion in total liabilities.
In terms of income generation, Humana’s 0.60% dividend yield is nothing special. That said, the company has plenty of room to grow its dividend, with a 14% payout ratio at the moment. And it has already raised its dividend six times in the last five years, for an annualized growth rate of 24%.
Bottom Line
At the moment, 12 of the 17 brokerage recommendations Zacks has are “Strong Buys,” alongside two “Buys,” and nothing below a “Hold.” Plus, its Medical – HMOs segment sits in the top 15% of over 250 Zacks industries.