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Humana (HUM) Gears Up for Q3 Earnings: What Awaits the Stock?

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Humana Inc.’s (HUM - Free Report) third-quarter 2020 results are scheduled to be reported on Nov 3, 2020.

Factors to Impact Q3 Results

The to-be-reported quarter’s earnings results are likely to reflect better revenues. Notably, the consensus mark for revenues of $18.6 billion hints at a 15% rise from the prior-year quarter’s reported number.

The company’s top line is likely to have witnessed an upside in the third quarter owing to higher premiums and its strong Medicaid and Medicare lines of businesses. The consensus mark for the company's total medical membership and total premiums suggests a hike of 3.1% and 15.7% each from the respective year-ago reported figures.

Per its last earnings call, management expects adjusted EPS for the third quarter to be around 15% of the full-year guidance at the midpoint, which is coming to $2.78 from a seasonality perspective. This is lower than the Zacks Consensus Estimate of $2.86, which indicates a decrease of 43.1% from the year-ago quarter’s reported figure.  This downside is likely to have been due to elevated expenses.

The company is likely expected to have witnessed an uptick in its telehealth services owing to the current demand for the same.

However, its specialty membership might have partially taken a hit from membership migration in the September quarter. The consensus mark for the same indicates a 10.3% decline from the prior-year quarter’s reported figure.

Additionally, total investment income for the to-be-reported quarter might have noticed a downtrend due to low investment yield. The consensus estimate for the same implies a 33% drop from the year-ago period’s reported figure.

The Zacks Consensus Estimate for the third-quarter benefit ratio stands at 86%, indicating a rise from the year-ago period's reported level of 85%.

What the Quantitative Model States

Our proven model predicts an earnings beat for Humana this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of beating estimates. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: Humana has an Earnings ESP of +5.83%. This is because the Most Accurate Estimate is pegged at $3.03, higher than the Zacks Consensus Estimate of $2.86.  You can see the complete list of today’s Zacks #1 Rank stocks here.

Humana Inc. Price and EPS Surprise

Humana Inc. Price and EPS Surprise

Humana Inc. price-eps-surprise | Humana Inc. Quote

Zacks Rank: Humana currently carries a Zacks Rank #2, which increases the predictive power of ESP.

Highlights of Q2 Earnings and Surprise History

Humana's second-quarter 2020 operating earnings per share of $12.56 beat the Zacks Consensus Estimate by 21.5%. Moreover, the bottom line soared 107.6% year over year.

This upside can primarily be attributed to higher revenues witnessed by the company. However, Humana faced a decline in hospital admissions and lower utilization during April, which again increased in May and June.

The company boasts a stellar earnings record with its bottom line having delivered a positive surprise in all the trailing four quarters, the average being 11.6%.

Other Stocks to Consider

Here are a few other stocks worth considering from the medical sector with the perfect mix of elements to beat on earnings this reporting cycle:

ACADIA Pharmaceuticals Inc. (ACAD - Free Report) has an Earnings ESP of +3.69% and is presently Zacks #3 Ranked.

Canopy Growth Corporation (CGC - Free Report) is currently #3 Ranked and has an Earnings ESP of +7.55%.

Bausch Health Cos Inc. (BHC - Free Report) has an Earnings ESP of +4.88% and a Zacks Rank #3 at present.

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