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Here's Why You Should Retain Humana (HUM) in Your Portfolio
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Humana Inc. (HUM - Free Report) is well poised to grow backed by solid Medicare business and strategic initiatives. Its financial flexibility is also impressive.
For 2020, management expects adjusted EPS projection of $18.25-$18.75 for 2020, indicating an upside of 3.5% from the prior-year reported figure. The full-year individual Medicare Advantage membership is anticipated between 300,000 members and 350,000 members. Humana reiterated its expectations for group Medicare Advantage net membership gains. It now expects a year-over-year increase of 90,000 members in 2020.
Humana’s Medicare business has been performing robustly from past several quarters on the back of higher enrolment. Further, a better offering contributed to this outperformance. This is evident from 54% Medicare membership growth from 2013 to 2018. Over the past decade, the company saw maximum growth in Individual Medicare Advantage during 2019, which is pretty impressive. Last month, it received a contract from the Kentucky Cabinet for Health and Family Services (CHFS) again. This new agreement is likely to benefit enrollees of the company’s Medicaid programs in Kentucky. Humana, which is based in Kentucky, currently serves 150,000 Medicaid members in the state and has a long history of effectively catering to health issues in the region.
This leading insurer has taken up various strategic initiatives over the past few years, which in turn have put it on a growth trajectory. Some of its significant buyouts, including Family Physicians Group, Your Home Advantage, Curo and a share in Kindred at Home, have strengthened its home health and hospice business line. These strategic initiatives position the company well for long-term growth.
The company’s solvency level is impressive to investors. Its total debt is 39.2% (up from 32% sequentially as of Dec 31, 2020) of capital, almost in line with the industry’s average of 38.8%. Also, its time interest earned stands at 15.3X, much higher than the industry average of 10.3X. As of Mar 31, 2020, the company had cash, cash equivalents and investment securities of $17.55 billion, higher than its long-term debt of $6 billion. The company also has access to an additional $2 billion under its credit agreement and it further increased its liquidity level with the issuance of $1.1 billion in senior notes and $1 billion drawn under one-year term loan bank commitment.
By virtue of its balance sheet position, the company has been efficiently deploying excess capital. It has been hiking dividend since 2011. In February 2020, the company raised quarterly dividend by 14%. Although it didn’t buy back shares in the first quarter, we believe, its financial strength will continue to boost investors’ confidence.
However, escalating expenses remain a concern. In first-quarter 2020, it jumped 17% year over year. The company anticipates witnessing a rise in benefit expenses, which will induce overall higher operating expenses. Nonetheless, the company is well-poised for growth, which is evident from its VGM Score of A.
Price Performance
Shares of this company have surged 49.5% in a year’s time, compared with the industry’s rally of 13%.
The performance looks stronger than other companies in the same space, such as Molina Healthcare Inc. (MO - Free Report) H), Anthem Inc. and The Joint Corp (JYNT - Free Report) . While shares of Molina have gained 30.2%, Joint Corp and Anthem have lost 23.3% and 5%, respectively in the same time frame.
The Hottest Tech Mega-Trend of All
Last year, it generated $24 billion in global revenues. By 2020, it's predicted to blast through the roof to $77.6 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
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Here's Why You Should Retain Humana (HUM) in Your Portfolio
Humana Inc. (HUM - Free Report) is well poised to grow backed by solid Medicare business and strategic initiatives. Its financial flexibility is also impressive.
For 2020, management expects adjusted EPS projection of $18.25-$18.75 for 2020, indicating an upside of 3.5% from the prior-year reported figure. The full-year individual Medicare Advantage membership is anticipated between 300,000 members and 350,000 members. Humana reiterated its expectations for group Medicare Advantage net membership gains. It now expects a year-over-year increase of 90,000 members in 2020.
Here we shall briefly discuss the reasons for retaining this Zacks Rank #3 (Hold) health insurance company in your investment portfolio. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Humana’s Medicare business has been performing robustly from past several quarters on the back of higher enrolment. Further, a better offering contributed to this outperformance. This is evident from 54% Medicare membership growth from 2013 to 2018. Over the past decade, the company saw maximum growth in Individual Medicare Advantage during 2019, which is pretty impressive. Last month, it received a contract from the Kentucky Cabinet for Health and Family Services (CHFS) again. This new agreement is likely to benefit enrollees of the company’s Medicaid programs in Kentucky. Humana, which is based in Kentucky, currently serves 150,000 Medicaid members in the state and has a long history of effectively catering to health issues in the region.
This leading insurer has taken up various strategic initiatives over the past few years, which in turn have put it on a growth trajectory. Some of its significant buyouts, including Family Physicians Group, Your Home Advantage, Curo and a share in Kindred at Home, have strengthened its home health and hospice business line. These strategic initiatives position the company well for long-term growth.
The company’s solvency level is impressive to investors. Its total debt is 39.2% (up from 32% sequentially as of Dec 31, 2020) of capital, almost in line with the industry’s average of 38.8%. Also, its time interest earned stands at 15.3X, much higher than the industry average of 10.3X. As of Mar 31, 2020, the company had cash, cash equivalents and investment securities of $17.55 billion, higher than its long-term debt of $6 billion. The company also has access to an additional $2 billion under its credit agreement and it further increased its liquidity level with the issuance of $1.1 billion in senior notes and $1 billion drawn under one-year term loan bank commitment.
By virtue of its balance sheet position, the company has been efficiently deploying excess capital. It has been hiking dividend since 2011. In February 2020, the company raised quarterly dividend by 14%. Although it didn’t buy back shares in the first quarter, we believe, its financial strength will continue to boost investors’ confidence.
However, escalating expenses remain a concern. In first-quarter 2020, it jumped 17% year over year. The company anticipates witnessing a rise in benefit expenses, which will induce overall higher operating expenses.
Nonetheless, the company is well-poised for growth, which is evident from its VGM Score of A.
Price Performance
Shares of this company have surged 49.5% in a year’s time, compared with the industry’s rally of 13%.
The performance looks stronger than other companies in the same space, such as Molina Healthcare Inc. (MO - Free Report) H), Anthem Inc. and The Joint Corp (JYNT - Free Report) . While shares of Molina have gained 30.2%, Joint Corp and Anthem have lost 23.3% and 5%, respectively in the same time frame.
The Hottest Tech Mega-Trend of All
Last year, it generated $24 billion in global revenues. By 2020, it's predicted to blast through the roof to $77.6 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
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