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Why You Should Add Humana (HUM) Stock to Your Portfolio Now
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Humana Inc. (HUM - Free Report) is expected to remain on its growth track with the help of contract wins and expanding operations. A solid capital position, which signals growing operational strength, is also benefiting the company.
Humana — with a market cap of $53.7 billion — is one of the largest healthcare plan providers in the United States. It offers supplemental, medical benefit plans and various other products to its customers. Courtesy of solid prospects, this currently Zacks Rank #2 (Buy) stock is worth investing in at the moment.
Let’s delve deeper.
The Zacks Consensus Estimate for Humana’s 2023 earnings is pegged at $28.29 per share, indicating a 12.1% year-over-year increase. The company has witnessed two upward estimate revisions in the past 30 days against none in the opposite direction. HUM beat on earnings in all the last four quarters, with an average surprise of 8.9%.
The consensus estimate for 2023 revenues stands at $102.2 billion, suggesting a 10% rise from the prior-year reported figure. Strength in the Individual Medicare Advantage business and state-based contract wins are likely to be major tailwinds.
Shares of the company closed at $430.14 on Jul 7, 2023, which was close to the lower end of its 52-week range of $429.63 - $571.30, leaving ample room to run.
Contract wins bode well for the company. Last month, it was selected by the Oklahoma Health Care Authority to serve Medicaid members via SoonerSelect, the Medicaid managed care program in Oklahoma. HUM’s Ohio contract went live in February 2023. Contracts like these are likely to bring higher membership growth, thereby providing a boost to its overall Medicaid business.
Last month, its CenterWell Senior Primary Care business opened its 250th senior primary care facility in Dallas, TX, marking continuous growth in the provider space. The CenterWell brand is likely to open 30-50 additional facilities per year through 2025. These expansionary moves are likely to boost the company’s top line. HUM is not only expanding its geographic footprint but also enhancing its capabilities to improve its value-based services for better patient outcomes.
The CenterWell segment is gaining from improving membership growth in the Individual Medicare Advantage business. For this year, the unit’s revenues are likely to be in the range of $18 - $18.5 billion. The mid-point of the guidance indicates 5.5% growth from the year-ago level.
The company’s financial strength enables it to navigate through difficult scenarios. HUM exited the first quarter of 2023 with cash and cash equivalents of $13.8 billion, which jumped from $5.1 billion at 2022-end, and was significantly higher than its long-term debt of $9.7 billion. Also, over the trailing 12-month period, its free cash flow surged 186.2% to $9.9 billion.
Its financial strength allows it to make shareholder-friendly moves. In the first quarter alone, it bought back shares worth $66.7 million. As of Apr 25, 2023, HUM had an excess share repurchase capacity of $2.8 billion. The company also paid out dividends of $100 million in the first quarter.
Risks
However, there are a few factors, which investors should keep an eye on.
As seniors are now undergoing elective procedures, which were delayed due to pandemic-related constraints, fewer premiums will likely remain in hand after paying for the procedures for health insurers. Demand for outpatient surgeries, emergency room and dental services is currently growing.
Humana now predicts its benefit expense ratio for 2023 to drift toward the upper limit of the projected range of 86.3 - 87.3%. Nevertheless, we believe that a systematic and strategic plan of action will drive its long-term growth.
The Zacks Consensus Estimate for Neogen’s 2023 earnings has improved 11.1% in the past 60 days. NEOG beat earnings estimates in three of the last four quarters and missed once, with the average surprise being 123.4%.
The Zacks Consensus Estimate for Apyx Medical’s 2023 earnings indicates a 38.8% improvement from the year-ago reported figure. The consensus estimate for APYX’s 2023 revenues indicates 37.3% year-over-year growth.
The Zacks Consensus Estimate for Boston Scientific’s 2023 bottom line suggests a 14% increase from the prior-year level. BSX has witnessed three upward estimate revisions in the past 60 days against none in the opposite direction.
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Why You Should Add Humana (HUM) Stock to Your Portfolio Now
Humana Inc. (HUM - Free Report) is expected to remain on its growth track with the help of contract wins and expanding operations. A solid capital position, which signals growing operational strength, is also benefiting the company.
Humana — with a market cap of $53.7 billion — is one of the largest healthcare plan providers in the United States. It offers supplemental, medical benefit plans and various other products to its customers. Courtesy of solid prospects, this currently Zacks Rank #2 (Buy) stock is worth investing in at the moment.
Let’s delve deeper.
The Zacks Consensus Estimate for Humana’s 2023 earnings is pegged at $28.29 per share, indicating a 12.1% year-over-year increase. The company has witnessed two upward estimate revisions in the past 30 days against none in the opposite direction. HUM beat on earnings in all the last four quarters, with an average surprise of 8.9%.
Humana Inc. Price and EPS Surprise
Humana Inc. price-eps-surprise | Humana Inc. Quote
The consensus estimate for 2023 revenues stands at $102.2 billion, suggesting a 10% rise from the prior-year reported figure. Strength in the Individual Medicare Advantage business and state-based contract wins are likely to be major tailwinds.
Shares of the company closed at $430.14 on Jul 7, 2023, which was close to the lower end of its 52-week range of $429.63 - $571.30, leaving ample room to run.
Contract wins bode well for the company. Last month, it was selected by the Oklahoma Health Care Authority to serve Medicaid members via SoonerSelect, the Medicaid managed care program in Oklahoma. HUM’s Ohio contract went live in February 2023. Contracts like these are likely to bring higher membership growth, thereby providing a boost to its overall Medicaid business.
Last month, its CenterWell Senior Primary Care business opened its 250th senior primary care facility in Dallas, TX, marking continuous growth in the provider space. The CenterWell brand is likely to open 30-50 additional facilities per year through 2025. These expansionary moves are likely to boost the company’s top line. HUM is not only expanding its geographic footprint but also enhancing its capabilities to improve its value-based services for better patient outcomes.
The CenterWell segment is gaining from improving membership growth in the Individual Medicare Advantage business. For this year, the unit’s revenues are likely to be in the range of $18 - $18.5 billion. The mid-point of the guidance indicates 5.5% growth from the year-ago level.
The company’s financial strength enables it to navigate through difficult scenarios. HUM exited the first quarter of 2023 with cash and cash equivalents of $13.8 billion, which jumped from $5.1 billion at 2022-end, and was significantly higher than its long-term debt of $9.7 billion. Also, over the trailing 12-month period, its free cash flow surged 186.2% to $9.9 billion.
Its financial strength allows it to make shareholder-friendly moves. In the first quarter alone, it bought back shares worth $66.7 million. As of Apr 25, 2023, HUM had an excess share repurchase capacity of $2.8 billion. The company also paid out dividends of $100 million in the first quarter.
Risks
However, there are a few factors, which investors should keep an eye on.
As seniors are now undergoing elective procedures, which were delayed due to pandemic-related constraints, fewer premiums will likely remain in hand after paying for the procedures for health insurers. Demand for outpatient surgeries, emergency room and dental services is currently growing.
Humana now predicts its benefit expense ratio for 2023 to drift toward the upper limit of the projected range of 86.3 - 87.3%. Nevertheless, we believe that a systematic and strategic plan of action will drive its long-term growth.
Other Key Picks
Investors interested in the broader medical space can also check some other top-ranked medical companies like Neogen Corporation (NEOG - Free Report) , Apyx Medical Corporation (APYX - Free Report) and Boston Scientific Corporation (BSX - Free Report) , each carrying a Zacks Rank #2 at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Neogen’s 2023 earnings has improved 11.1% in the past 60 days. NEOG beat earnings estimates in three of the last four quarters and missed once, with the average surprise being 123.4%.
The Zacks Consensus Estimate for Apyx Medical’s 2023 earnings indicates a 38.8% improvement from the year-ago reported figure. The consensus estimate for APYX’s 2023 revenues indicates 37.3% year-over-year growth.
The Zacks Consensus Estimate for Boston Scientific’s 2023 bottom line suggests a 14% increase from the prior-year level. BSX has witnessed three upward estimate revisions in the past 60 days against none in the opposite direction.