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Is a Beat in the Offing for Humana's (HUM) Q1 Earnings?

Zacks Equity Research

Humana Inc.’s HUM first-quarter 2019 results are scheduled to be reported on May 1. In the last reported quarter, the company came up with a positive surprise of 4.8%, led by Medicare Advantage membership growth and a significant operating efficiency.

Q1 Expectations

In the first quarter of 2019, the company is likely to gain from higher membership and an increase in contribution from Medicare Advantage. The Zacks Consensus Estimate for its earnings is pegged at $4.30 per share, indicating 28% growth from the year-ago reported figure.

The company expects first-quarter earnings to garner 25% of its full-year earnings per share, which is $17-$17.50.

In January 2019, the individual MA membership in the Retail segment increased by around 3,40,000 members. This uptrend is likely to continue in the remaining to-be-reported quarter as well.  Membership growth should boost revenues at the Retail segment. The consensus estimate for total revenues from the Retail segment stands at $13.6 billion, suggesting 12.3% improvement from the year-earlier reported figure. The company’s revenues should gain from strong performances at the Retails segments and the Medicare Advantage business. The consensus mark for the company’s revenues stands at $15.8 billion, implying 10.6% rise from the prior-year reported number.

In the quarter to be reported, the company is expected to have witnessed a robust balance sheet with free cash flow. However, its expenses are likely to escalate due to growth-related costs.

What the Quantitative Model States

The proven Zacks model conclusively shows that Humana is likely to beat on earnings this to-be-reported quarter. This is because the stock needs to have 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.

Earnings ESP: Humana has an Earnings ESP of +0.84%. This is because the Most Accurate Estimate is pegged at $4.34, higher than the Zacks Consensus Estimate of $4.30. 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. Quote

Zacks Rank: Humana carries a Zacks Rank #3, which increases the predictive power of ESP. Further, with a positive ESP in the combination, the stock’s chances of beating estimates are significantly higher. You can see the complete list of today’s Zacks #1 Rank stocks here.

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

Upcoming Releases From Medical Sector

AmerisourceBergen Corporation ABC is slated to release first-quarter earnings figures on May 2. This stock has an Earnings ESPof +0.26% and a Zacks Rank of 3.

Aurora Cannabis Inc. ACB has an Earnings ESP of +73.33% and is a Zacks #3 Ranked player. The company is scheduled to announce first-quarter earnings on May 14.    

Adverum Biotechnologies, Inc. ADVM has an Earnings ESP of +1.82% and is a #3 Ranked player. The company is set to report first-quarter earnings on May 8.

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