Humana Hits 52-Week High on Latest ACO Deals, Buybacks - Analyst Blog

On Mar 20, shares of Humana Inc.HUM scaled a new 52-week high of $183.01 on a series of positive developments at the company. These include the latest accountable care arrangements, completion of the accelerated share repurchase program, and a positive outlook for 2015.

The shares gained almost 55.2% in the one-year period to close at $182.79 in the last trading session. Moreover, Humana's one-year return of 56.24% was significantly higher than the S&P 500's return of 12.93%. It was also above that of the other industry players like UnitedHealth Group Incorporated UNH , Aetna Inc. AET and Universal American Corp. UAM that recorded returns of 46.46%, 43.47% and 50.14%, respectively.

Humana has entered into a few accountable care agreements lately to provide more coordinated services that in turn will improve the health of the Humana Medicare Advantage (MA) members. Over a three-week period the company has entered into three partnerships in this regard. These include its tie-ups with HealthSpan Physicians, Summa Health System's accountable care organization (ACO) - NewHealth Collaborative, and Integrated Health Network of Wisconsin ("IHN"). While the first two collaborations are designed to cater to the MA members in Northeast Ohio, the third is meant to reduce healthcare costs as well as improve care for seniors in Wisconsin.

Moreover, Humana announced the completion of the accelerated share repurchase program last week. This program was initiated in Nov 2014 under which the company bought back 3.4 million shares for approximately $497 million. Completion of this program will help the company in achieving its share repurchase target of $1 billion by Jun 30, 2015. As of Mar 13, 2015, the company was left with shares worth $365 million for repurchases.

Last month, the company reported fourth-quarter earnings that improved year over year owing to a decrease in share count driven by enhanced share repurchases. Increased memberships led to higher premiums and services revenues thereby driving top line.

Management remained upbeat about the company's performance in 2015 and expects to generate strong growth and operating efficiencies leading to an improvement in earnings per share. Memberships and cash flows are also expected to increase.

Humana currently carries a Zacks Rank #3 (Hold).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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