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Humana (HUM) Rallies 59.3% in a Year: Further Upside Left?

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Humana Inc. (HUM - Free Report) is well-poised for growth on the back of its robust Medicare business and strategic initiatives.

Shares of this Zacks Rank #2 (Buy) company have surged 59.3% in a year's time, outperforming its industry's increase of 13%. The price performance looks stellar when compared to other companies’ stock movements in the same space, such as Anthem, Inc. (ANTM - Free Report) , Centene Corporation (CNC - Free Report) , and UnitedHealth Group Incorporated (UNH - Free Report) , which have gained 4.4%, 23.8% and 18.3%, respectively, in the same time frame. All three stocks carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The company also has a pleasant earnings surprise history, having exceeded the Zacks Consensus Estimate in all the trailing four quarters, the average being 10.1%.

Is the Bull Run Likely to Continue?

Recently, the company reported first-quarter 2020 operating earnings per share of $5.40, which beat the Zacks Consensus Estimate by 11.6%. Moreover, the bottom line improved 20.5% year over year on the back of higher revenues.

The top line of the company witnessed growth owing to premium revenues from improved membership and per member premiums in its Medicare Advantage as well as state-based contract businesses. Humana’s Retail segment also performed well in the last reported quarter.

The company is well-placed for growth, courtesy of its Medicare business, which has been delivering solid numbers over the last several quarters. The full-year individual Medicare Advantage membership is anticipated to be around 300,000-350,000, higher than the previous range of 270,000-330,000 members.

Moreover, a series of buyouts and dispositions carved a growth path for this company. Recently, it closed the Enclara deal, expanding its hospice pharmacy business line.

Following first-quarter results, the company reaffirmed its adjusted EPS projection of $18.25-$18.75 for 2020, the midpoint indicating an upside of 3.5% from the prior-year reported figure. Humana reiterated its expectations for group Medicare Advantage net membership gains. It now expects a year-over-year increase of 90,000 members for the ongoing year. We expect this strong outlook to instill investors’ confidence in the company.

In an effort to enhance shareholder value, Humana has been efficiently deploying excess capital for the past several years. It has been hiking its dividend since 2011. In February 2020, the company raised its quarterly dividend by 14%, which should buoy investor’s optimism on the stock.

For the current year, the Zacks Consensus Estimate for earnings stands at $18.55 per share, suggesting a 3.8% rise from the year-ago reported figure.

Over the past 30 days, the company has witnessed its 2020 earnings move 0.2% north.

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