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Humana (HUM) Scales New 52-Week High on Solid Q3 Earnings

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Shares of Humana Inc. (HUM - Free Report) hit a fresh 52-week high of $340.48 on Nov 15, before closing the day at $335.55. Impressive earnings performance in the third quarter and solid Medicare business contributed to this rally.

Over the past year, the Zacks Rank #3 (Hold) stock has gained 8.1%, significantly outperforming the industry’s growth of 2.4%.



Let’s delve deeper and analyze the factors responsible for the stock’s upsurge.

Driving Factors

The company retained investors' favorable sentiments surrounding the stock with an earnings beat in all the last four quarters, the average being 8.6%.

Humana’s third-quarter 2019 earnings per share of $5.03 surpassed both the Zacks Consensus Estimate and the year-over year figure by 9.8%. This upside can primarily be attributed to its Medicare Advantage (MA) membership growth and higher revenues.

The company’s Medicare business has been performing strongly over the last many quarters. Impressive growth in the Medicare Advantage business is owing to its operating initiatives, evident from the 54% rise in Medicare membership from 2013 to 2018. Humana has been chosen as one of the health plans to provide Florida’s Medicare retirees with Medicare coverage effective Jan 1, 2020. The company recently announced the launch of Humana Honor Medicare Advantage plans for 2020, designed to complement the Veterans Affairs program.

The company has also been progressing well on the back of its strategic initiatives. The buyouts of Family Physicians Group, Your Home Advantage, Curo and a share in Kindred at Home poise it well for long-term growth.

Humana has been efficiently deploying excess capital for the past several years, which continues to instill investor’s confidence in the stock. The company has been witnessing steady operating cash flows over the last many quarters (except 2018). In February 2019, it raised dividend by 10% to 55 cents per share. This initiative further reflects the company’s strong liquidity and it not only retains the existing investors’ optimism but also attracts new ones.

Stocks to Consider

Investors interested in the medical sector might consider some better-ranked stocks like Select Medical Holdings Corporation (SEM - Free Report) , WellCare Health Plans, Inc. (WCG - Free Report) and Genesis Healthcare, Inc. (GEN - Free Report) . You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Select Medical Holdings operates critical illness recovery hospitals, rehabilitation hospitals, outpatient rehabilitation clinics and occupational health centers. In the trailing four quarters, the company’s average beat was 11.07%. The stock sports a Zacks Rank #1.

WellCare Health offers managed care services to government-sponsored health care programs. The company pulled off average positive surprise of 17.32% in the preceding four quarters. It carries a Zacks Rank #2 (Buy).

Genesis Healthcare operates skilled nursing facilities and assisted/senior living facilities. In the last four quarters, the company delivered average beat of 80.96%. It has a Zacks Rank of 1.

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