We have maintained our Neutral recommendation on
) based on its growing membership base, organic and inorganic
expansion and strong cash position, which offset the headwinds
faced by the company. This health maintenance organization
carries a Zacks Rank #3 (Hold).
Humana generated positive earnings surprise in the last four
quarters, with an average surprise of 21.21%. Moreover, 8 out of
11 analysts raised their 2013 earnings estimate in the last 30
days, leading to a Zacks Consensus Estimate of $8.68. This
represents a year-over-year improvement of 24.14%.
Moreover, on May 1, 2013, Humana reported first-quarter 2013
operating earnings of $407 million or $2.69 per share. The
results substantially surpassed the Zacks Consensus Estimate of
$1.78 as well as the year-ago earnings of $248 million or $1.49
Moreover, with the acquisitions of Arcadian, SeniorBridge,
Concentra and MD Care, Humana has increased its focus on its core
business as a health care provider, expanded its Medicare
coverage, enhanced the quality of its healthcare services,
expanded its provider network in various regions and reduced its
exposure to health care overhaul regulations. Further, the strong
cash position enabled the company to increase its quarterly
dividend by 3.85% in Apr 2013, after a 4% dividend hike in Apr
These positives dwarf the headwinds such as high competition
and increasing expenses. Humana has been incurring
higher-than-expected expenses owing to increases in operating
cost along with depreciation and amortization costs. Increased
benefits have also led to deteriorating benefit ratios across
most operating segments. Although operating expenses inched down
marginally in the first quarter of 2013, operating expenses are
expected to rise in the remaining part of the year.
Other Stock to Consider
While we maintain a cautious stance on Humana, other health
maintenance organizations worth considering are
) - Zacks Rank #1 (Strong Buy),
Molina Healthcare Inc.
) - Zacks Rank #1 (Strong Buy) and
Health Net Inc.
) - Zacks Rank #2 (Buy).
AETNA INC-NEW (AET): Free Stock Analysis
HEALTH NET INC (HNT): Free Stock Analysis
HUMANA INC NEW (HUM): Free Stock Analysis
MOLINA HLTHCR (MOH): Free Stock Analysis
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