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Retail Loss to Affect Humana's (HUM) Q4 Earnings: Here's How

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Humana Inc. (HUM - Free Report) is set to report fourth-quarter 2021 results on Feb 2, before the opening bell.

In the last reported quarter, the leading health care plan provider reported adjusted earnings per share of $4.83, beating the Zacks Consensus Estimate of $4.61, backed by solid contribution from its Retail and Healthcare Services segments. Also, state-based contracts’ membership growth buoyed the results.

Humana beat the consensus estimate in each of the prior four quarters, with the average earnings surprise being 3.4%. This is depicted in the graph below:

Humana Inc. Price and EPS Surprise

Humana Inc. Price and EPS Surprise

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

Let’s see how things have shaped up prior to the fourth-quarter earnings announcement.

Trend in Estimate Revision

The Zacks Consensus Estimate for fourth-quarter earnings per share of $1.23 has witnessed no movement in the past 30 days. The estimated figure suggests an improvement from the prior-year loss of $2.30 per share.

The consensus estimate for fourth-quarter revenues of $21.2 billion indicates an 11% increase from the year-ago reported figure.

Factors to Note

The company’s top line is likely to have witnessed an upside in the fourth quarter owing to higher premiums and strong Medicaid and Medicare lines of businesses. It is also likely to have gained from state-based membership growth and a solid contribution from the Healthcare Services segment.

For the fourth quarter, the benefit ratio from the Retail segment is expected to grow from the year-ago period. Increased per member Medicare Advantage premiums might have aided the segment’s performance. Yet, profits are expected to have taken a hit from rising costs and expenses.

The Zacks Consensus Estimate for total medical membership suggests a hike of 1.7% from the year-ago reported figure. The consensus mark for total premium revenues indicates an 8.2% year-over-year increase. The Zacks Consensus Estimate for Specialty Membership indicates a 6.3% year-over increase.

The Zacks Consensus Estimate for pretax earnings from the Healthcare Services segment is pegged at $356 million, indicating a massive jump from $122 million a year ago. This could have positioned the company for year-over-year bottom-line growth.

The consensus mark for pretax loss for the Group and Specialty segment is pegged at $60 million. Also, the consensus mark for pretax loss from the Retail segment is pegged at $76 million, making an earnings beat uncertain.

Earnings Whispers

Our proven model does not conclusively predict an earnings beat for Humana this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. That is not the case here as you will see below.

Earnings ESP: The company’s Earnings ESP is 0.00%. This is because the Most Accurate Estimate is currently pegged at earnings of $1.23 per share, in line with the Zacks Consensus Estimate.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Humana currently carries a Zacks Rank #4 (Sell).

Stocks to Consider

While an earnings beat looks uncertain for Humana, here are some companies from the medical space that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this time around:

Community Health Systems, Inc. (CYH - Free Report) has an Earnings ESP of +23.00% and a Zacks Rank of 1. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Community Health Systems’ 2021 earnings suggests an increase of 257.8% year over year.

Universal Health Services, Inc. (UHS - Free Report) has an Earnings ESP of +2.33% and is a Zacks #3 Ranked player.

The consesnsus estimate for Universal Health Services’ bottom line for 2021 indicates 5.4% year-over-year growth.

UnitedHealth Group Incorporated (UNH - Free Report) has an Earnings ESP of +0.35% and a Zacks Rank #3.

The Zacks Consensus Estimate for UnitedHealth Group’s 2021 earnings suggests an increase of 14.1% year over year.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.

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