On Nov 10, 2016, shares of Humana Inc. (HUM - Free Report) hit a 52-week high of $194.05 driven by strong third-quarter 2016 results. About 3.5 million shares exchanged hands in the last trading session and the stock finally closed at $192.88, down 0.52%.
The stock price appreciation was fueled by the company’s robust quarterly earnings of $3.18per share that surpassed the Zacks Consensus Estimate by 4%. The bottom line also improved 41% year over year on solid performance across all business lines except the individual commercial business. Revenues inched up 2% year over year to $13.7 billion primarily driven by higher premiums and services revenues growth. A better control on benefit expenses also resulted in a 240 basis points improvement in Humana’s benefit expense ratio.
The investors were also thrilled by Humana’s guidance raise following third quarter earnings outperformance. The company now expects adjusted earnings per share to be approximately $9.50 and consolidated revenues to be approximately $55 billion as against $54.0–$54.5 billion guided earlier. For 2017, the company anticipates higher pre-tax income, primarily due to improved operating performances by its individual Medicare Advantage and Healthcare Services businesses.
Investors also view favorably, Humana’s Medicare Advantage business which has been delivering strong results for quite some time now. This consistently impressive performance has been supported by operating initiatives that have contributed to better medical claims development and lower current-year utilization. As a result, the company has raised its guidance for membership growth in group Medicare Advantage and now estimates it between 125,000 and 130,000 as against the prior guidance of 120000 to 125000.
Notably, the company delivered an average positive surprises in three of the last four quarters with an average beat of 1.94%. Based on the earnings outperformance, the Zacks Consensus Estimate for 2016 and 2017 has been revised upward by 0.7% and 0.3%, respectively, over the last seven days.
The shares of Humana also must have received a fillip from the new governance featuring the Presidency of Donald Trump, on hope that it will help the company sail through the merger with Aetna Inc. (AET - Free Report) . Along with Humana and Aetna, other medical sector companies like Anthem Inc. (ANTM - Free Report) , UnitedHealth Group Inc. (UNH - Free Report) to name a few are also counting on a better future under the leadership of the new president.
HUMANA INC NEW Price and Consensus
Humana presently carries Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Zacks' Top Investment Ideas for Long-Term Profit
How would you like to see our best recommendations to help you find today’s most promising long-term stocks? Starting now, you can look inside our portfolios featuring stocks under $10, income stocks, value investments and more. These picks, which have double and triple-digit profit potential, are rarely available to the public. But you can see them now. Click here >>