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What's in Store for Humana (HUM) Stock in Q4 Earnings?

Zacks Equity Research

Humana Inc.’s HUM fourth-quarter 2018 results are scheduled to be reported on Feb 6. In the last reported quarter, the company came up with a positive surprise of 6.8%, led by Medicare Advantage membership growth, lower impatient medical utilization, a favorable prior-period medical claims reserve development and its significant operating efficiency.

The Zacks Consensus Estimate for fourth-quarter earnings is pegged at $2.53, up 22.8% year over year.

Q4 Expectations

The company’s top line is likely to gain on the back of increase in contribution from Medicare Advantage. The consensus mark for the its revenues stands at $13.9 billion, up 5.6% year over year. This upside can be attributed to strong segmental performances at the Group and Specialty segment, Retails segments and Medicare Advantage business.

The consensus mark for Total Medicare premiums from the Retail segment stands at $11.2 billion, up 11.2% year over year.

Moreover, Humana’s net investment income is likely to have witnessed an improvement in the to-be-reported quarter. The Zacks Consensus Estimate for the same is pegged at $30.13 million, up 67.4% year over year.

In the fourth quarter of 2018, the company is expected to have witnessed a robust balance sheet with free cash flow. However, the company’s expenses are likely to rise due to growth-related costs.

What the Quantitative Model States

Our proven model doesn’t conclusively show 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 -0.40%. This is because the Most Accurate Estimate is pegged at $2.52, lower than the Zacks Consensus Estimate of $2.53. 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 sports a Zacks Rank of 1, which increases the predictive power of ESP. However, the stock’s negative ESP leaves surprise prediction inconclusive as the company needs a positive ESP along with a top Zacks Rank to raise the odds of a likely earnings surprise. You can see the complete list of today’s Zacks #1 Rank stocks here.

We caution against the Sell-rated stocks (#4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Upcoming Releases From Medical Sector

Some stocks worth considering from the medical sector are as follows:

Molina Healthcare, Inc MOH is set to report fourth-quarter 2018 earnings performance on Feb 11. The stock has an Earnings ESP of +2.89% and is a Zacks #1 Ranked player.

Tenet Healthcare Corporation THC is slated to report fourth-quarter earnings on Feb 25. It has a Zacks Rank #3 and an Earnings ESP of +5.63%.

AxoGen, Inc. AXGN has an Earnings ESP of +14.29%. This Zacks #3 Ranked company is scheduled to release fourth-quarter earnings on Feb 27.

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