On May 30, 2013, the shares of Humana Inc. (HUM) hit a new 52-week high of $83.40. The momentum was driven by strong first-quarter earnings of this Zacks Rank #2 (Buy) stock, which recorded a 51% positive earnings surprise.
Moreover, Humana’s stock price has been soaring since it reported its first quarter results on May 1, resulting in a 12% gain to date. Further, the company reported positive earnings surprise in all the past four quarters, with an average beat of 21.2%.
Humana reported first-quarter 2013 net operating earnings of $407 million or $2.69 per share. The results substantially surpassed the Zacks Consensus Estimate of $1.78 as well as the year-ago earnings of $248 million or $1.49 per share.
Revenues of Humana for the reported quarter climbed 2.6% year over year to $10.49 billion, surpassing the Zacks Consensus Estimate of $10.25 billion. Revenues from premium increased 1% year over year to $9.87 billion, while services revenues surged 50% to $525 million in the reported quarter.
The strong results also prompted Humana to raise its earnings guidance for 2013 to $8.40–$8.60 per share from $7.60–$7.80. The Zacks Consensus Estimate of $8.66 lies above the range, representing a 23.8% year over year improvement.
Moreover, the valuation of Humana looks attractive. The shares are trading at a discount to its peers both on a price-to-book and on a forward price-to-earnings basis, while the return on equity of 15.9% is higher than the peer group average of 12.5%.The year-to-date return from the stock is 21%, above S&P’s return of 16%.
Other health maintenance organizations worth considering are Molina Healthcare Inc. (MOH) – Zacks Rank #1 (Strong Buy), Aetna Inc. (AET) – Zacks Rank #2 (Buy) and Health Net Inc. (HNT) – Zacks Rank #2 (Buy).
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