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Is a Beat in the Cards for Humana's (HUM) Earnings in Q2?

Zacks Equity Research

Humana Inc.’s HUM second-quarter 2019 results are scheduled to be reported on Jul 31, 2019. In the last reported quarter, the company delivered operating earnings per share of $4.48, beating the Zacks Consensus Estimate by 4.2% as well as improving 33.3% year over year. This upside can primarily be attributed to solid revenues and Medicare Advantage membership growth.

The company boasts a stellar earnings surprise history, having surpassed estimates in all the trailing four quarters, the average being 5.05%.

Q2 Factors

Solid membership growth is likely to have contributed to the company’s performance in the to-be-reported quarter. It expects second-quarter earnings to be about $5.24, indicating a 32.3% surge from the year-ago reported figure.

Humana’s strong Medicaid and Medicare lines of businesses are likely to favor its topline. The Zacks Consensus Estimate for revenues is pegged at $15.8 billion, suggesting growth of 11.4% from the year-ago reported figure.

Total premiums for the to-be-reported quarter are expected toface a decline. The Zacks Consensus Estimate for the same implies a 12.5% increase from the prior-year reported number.

However, Humana expected second-quarter earnings per share to be 30% lower than the full-year tally.

The company is expected to have seen a rise in individual Medicare Advantage membership count.

Humana is also likely to have retained its capital deployment efforts through share buybacks and dividend payouts in the second quarter of 2019.

However, the company might have witnessed a rise in operating expenses due to growth-related investments and benefit expenses.

An increase in leverage due to growth-related investments in the to-be-reported quarter is likely to heighten financial risk for the company and burden its margins.

What the Quantitative Model States

Our proven model conclusively shows that Humana is likely to beat on earnings this to-be-reported quarter. This is because the stock has the right combination of a positive Earnings ESP and a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

Earnings ESP: Humana has an Earnings ESP of +1.57%. This is because the Most Accurate Estimate is pegged at $5.32, higher than the Zacks Consensus Estimate of $5.24. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.

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. Along with a positive ESP in the combination, chances of an earnings beat are significantly higher for the stock this time around.

Conversely, the Sell-rated stocks (#4 or 5) should never be considered going into an earnings announcement, especially when the company is seeing negative estimate revisions.

Other Stocks to Consider

Some other stocks worth considering from the Health Maintenance Organization industry with the perfect combination of elements to also surpass estimates in the next releases are as follows:

DaVita Inc. DVA has an Earnings ESP of +15.57% and a Zacks Rank of 1. The company is set to report second-quarter earnings on Aug 1.

Mednax, Inc MD has an Earnings ESP of +2.13%. This Zacks #3 Ranked company is set to report second-quarter earnings performance on Aug 1.

Amerisource Bergen Corporation ABC is slated to release second-quarter financial figures on Aug 1. The stock has an Earnings ESP of +0.82% and a Zacks Rank of 3.

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Humana Inc. (HUM) : Free Stock Analysis Report
 
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