E Humana: Buy, Sell, Or Hold?

Healthcare is often thought of as a defensive sector, but there are companies within this category that investors might consider to be growth stocks. One such name is Humana Inc. (HUM), a stock held by institutional investors such as Maverick Capital

Human’s returns over the past five years are double that of the S&P 500 index. Over the last year, shares of Humana are higher by 23% while the market index has increased by 15%. At Sure Dividend, we are more concerned with where stocks are going than where they came from. This article will look at Humana’s business model and its potential returns to determine if now is the best time to buy Humana.

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Business Overview and Recent Earnings Results

Human is one of the largest publicly traded healthcare benefit companies in the U.S. The company has nearly 17 million medical members and an additional 5.4 million members in specialty products. The company offers a wide range of health and benefit plans for customers in the government, the private sector, and individuals. Humana has a current market capitalization of $54 billion and generated almost $65 billion in revenue in 2019.

The company reported third quarter earnings results on November 3. Adjusted earnings-per-share decreased 39% to $3.08, but was $0.28 ahead of analysts’ estimates. Revenue improved 23.6% to $20.1 billion, $1.5 billion better than expected.

The decrease in adjusted earnings-per-share stems from higher utilization rates compared to the previous year. Much of this impact on results was from COVID-19 testing and the costs related to treatment for the virus. COVID-19 related costs will likely be in the neighborhood of $1 billion for the year.

Non-COVID-19 medical utilization was at approximately 95% of pre-pandemic levels. Human expects full-year membership to grow by approximately 375K members, ahead of its previous range of 330K to 360K.

Human has guided towards adjusted earnings-per-share of $18.50 to $18.75 for the year. Even with an expected loss for the fourth quarter, the midpoint for Human’s guidance would result in a 4.3% gain from the previous year.

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Disclosure: Sure Dividend is published as an information service. It includes opinions as to buying, selling and holding various stocks and other securities.

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