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Is a Beat in the Cards for Humana's (HUM) Earnings in Q4?

Zacks Equity Research

Humana Inc.’s HUM fourth-quarter 2019 results are scheduled to be reported on Feb 5, 2019.

The Zacks Consensus Estimate for earnings is pegged at $2.20, indicating a decline of 17% from the year-ago reported figure.

The consensus mark for revenues of $16.1 billion suggests an uptick of 14% from the prior-year reported number.

Factors to Impact Q4 Results

The company’s top line is likely to have witnessed an upside during the fourth quarter on the back of growth in premiums, and its strong Medicaid and Medicare lines of businesses.

However, the overall earnings might have been affected by lower number of members due to consequent decline in Prescription Drug Plan (PDP) enrolment. The consensus mark for Speciality membership hints at a fall of 26.8% from the year-ago reported figure.

Humana’s fourth-quarter earnings performance might also reflect escalating growth-related investments.

The company is expected to have enjoyed healthy operating cash flow in the quarter to be reported on the back of excellent operating efficiency and solid working capital.

Additionally, total investment income for the to-be-reported quarter might have noticed an uptrend. The consensus estimate for the same implies a 28.6% rise from the year-ago reported figure.

Per its last earnings call, management had supposedly made certain incremental investments in the fourth quarter, which include higher Medicare annual election period marketing spend plus increased sales and service costs related to the PDP plan changes, etc. An elevation in such expenditures might weigh down the company’s margins.

What the Quantitative Model States

Our proven model predicts an earnings beat for Humana this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of beating estimates, which you can see below. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: Humana has an Earnings ESP of +0.15%. You can see the complete list of today’s Zacks #1 Rank stocks here.

Humana Inc. Price and EPS Surprise

Humana Inc. Price and EPS Surprise

Humana Inc. price-eps-surprise | Humana Inc. Quote

Zacks Rank: Humana carries a Zacks Rank #3, which increases the predictive power of ESP. Plus, its positive ESP makes us hopeful of a positive surprise in the upcoming quarterly release.

Highlights of Q3 Earnings and Surprise History

Humana’s third-quarter 2019 operating earnings per share of $5.03 beat both the Zacks Consensus Estimate and the year-over-year figure by 9.8%. This positivity can primarily be attributed to Medicare Advantage membership growth and higher revenues.

The company boasts a stellar earnings record, having delivered a positive surprise in all the trailing four quarters, the average being 8.6%.

Other Stocks to Consider

Some other stocks worth considering from the medical sector with the perfect combination of elements to also surpass estimates in the next releases are as follows:

Change Healthcare Inc. CHNG has an Earnings ESP of +1.83% and a Zacks Rank of 1. The company is set to report fourth-quarter earnings on Feb 12.

Clovis Oncology, Inc. CLVS has an Earnings ESP of +3.56% and a Zacks Rank #2. The company is set to report fourth-quarter earnings performance on Feb 24.

Tandem Diabetes Care, Inc. TNDM is slated to release fourth-quarter financial figures on Feb 24. The stock has an Earnings ESP of +27.59% and is Zacks #1 Ranked.

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Tandem Diabetes Care, Inc. (TNDM) : Free Stock Analysis Report
 
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Humana Inc. (HUM) : Free Stock Analysis Report
 
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