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  • friend_of_the_deceased friend_of_the_deceased Apr 19, 2000 12:51 PM Flag

    HMO earnings dj article pt.1

    United Health Group (UNH), formerly United
    HealthCare Corp., is not expected to suffer the same

    The Minneapolis-based company appears poised to
    continue its string of strong quarterly results by meeting
    or beating Street expectations of 91 cents a share
    with solid fundamentals, said Merrill Lynch analyst
    Roberta Walter Goodman. The company earned 72 cents a
    share a year ago.

    United Health Group's 1998
    realignment, which divided the firm into six business
    segments, should result in administrative savings and an
    acceleration in units not related to its health-care business,
    Goodman said. Investors should also expect modest revenue
    growth of 5% and 24% growth in earnings before interest,
    taxes, depreciation and amortization, she

    Cigna Corp. (CI), one of the managed-care industry's
    strongest performers, also stands as a contender to beat
    Wall Street's earnings target of $1.46 a share,
    compared with the $1.10 a share earned in the first
    quarter of 1999.

    The company's health-care
    business is expected to perform well, Goodman said, adding
    that Cigna should also benefit from one of the
    industry's most aggressive share repurchase

    Analysts agree that Oxford Health Plan Inc.'s (OXHP)
    turnaround is proceeding. The Norwalk, Conn., HMO, which
    fell into serious financial trouble two years ago, is
    expected to report its third consecutive profitable
    quarter, with earnings of 26 cents a share, up from last
    year's first-quarter loss of 6 cents a

    Goodman's estimates are slightly above the Street's at 27
    cents a share.

    Oxford's top line is not growing,
    Goodman said. First-quarter premium revenue is expected
    to decline as the company dumps unprofitable
    accounts. But earnings benefited from an improved business
    mix, higher premiums and expanded margins.

    company is not growing as measured in top line, but they
    have contracted to a more profitable book of
    business," Goodman said.

    Management at Pacificare
    Health Systems Inc. (PHSY) believes that it could beat
    first-quarter consensus estimates of $1.70 a share, up from
    $1.61 last year, based on the results of the first two
    months of the quarter, Frazier said. But close attention
    should be paid to the quality of those earnings, he

    "This is an industry segment where, when a company
    indicates to analysts that they can beat estimates, there
    have been quality issues," Frazier said.

    nation's largest Medicare HMO, which takes about 60% of
    its revenue from the federal government's health plan
    for the elderly, stands to benefit from strong
    premium growth as well as continued cost discipline. But
    less substantial items such as tax rate and investment
    income can also be used to bolster a company's bottom

    Management Change
    Pacificare's management is
    set to change with the retirement of Chief Executive
    Alan Hoops next year. Also, a share repurchase program
    is expected to contribute heavily to this year's
    earnings per share figure, Frazier said.

    Health Networks Inc. (WLP) remains one of the HMO
    industry's most reliable earnings performers with
    first-quarter profits targeted at $1.22 a share, up from
    first-quarter 1999 profits of $1.04 a share.

    Focused in
    the commercial market, Wellpoint does not have to
    fight against Medicare funding cuts, Merrill's Goodman
    said. Because Wellpoint steered clear of the
    price-cutting wars other HMOs entered a few years ago to
    attract large employers, the company has not been forced
    to play catch-up with its pricing, Goodman

    Rounding out the large-capitalization managed-care
    companies is Foundation Health Systems Inc. (FHS). The
    company is expected to earn 28 cents a share, up from 23
    cents a share during the first quarter of 1999.

    -Johanna Bennett; Dow Jones Newswires;

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