Humana’s Shares Up by 18.8% since Its Previous Earnings
Preview for Investors: Humana’s 1Q15 Earnings (Part 5 of 5)
Humana rose 18.8%
Humana is expected to release its 1Q15 earnings on April 29. Since the release of its 4Q14 earnings on February 4, the company’s shares rose by 18.8% from $150.40 to $178.70. The S&P 500 Index increased by about 2.9% in that period.
Humana’s share price witnessed a sudden surge after March 2015. This is attributed to the company’s increasing focus on its core operations, the completion of its accelerated share repurchase program, and the increasing MA (Medicare Advantage) payment rates for 2016.
Increasing focus
As a part of its business portfolio review, Humana divested its urgent care operations, Concentra, on March 23. This divestiture will enable the company to focus on its core health insurance and primary care businesses.
Share repurchase program
On March 16, Humana (HUM) declared the completion of its $500 million accelerated share repurchase program, which it announced on November 7, 2014. The accelerated share repurchase program is a part of Humana’s $2 billion share repurchase authorization and is a milestone toward the company’s expectation of repurchasing $1 billion in shares by June 30, 2015.
Increasing MA rates
CMS (Centers of Medicare and Medicaid Services) announced an average increase of 1.25% in MA payment rates for 2016. This announcement boosted investor sentiment and is expected to lead to unexpected profits for Humana and its peers, including UnitedHealth Group (UNH), Aetna (AET), and Anthem (ANTM).
Wall Street analyst estimates
Humana’s revenue is estimated to be $13.5 billion, and its EBITDA (earnings before interest, tax, depreciation, and amortization) margin is expected to be about 6.6%. Its net income is expected to be around $384.5 million. Humana’s EPS (earnings per share) is estimated to be around $2.55.
We’ll provide a follow-up report on Humana after its earnings are released on April 29. We’ll also cover the earnings reports for other health insurance companies (XLV) such as Aetna, Anthem, and Cigna when they release their 1Q15 earnings on April 28, April 29, and April 30, respectively.
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