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Humana (HUM) Continues to Ride on Medicare Business Momentum

Humana Inc. HUM has been constantly gaining traction from its Medicare business. Owing to strategic initiatives, membership from this business line grew at 54%, on average, from 2013 to 2018. Higher enrollment and a better offering led to this outperformance.

Demand for this business line is expected to bump up, riding on complex patient populations who are constantly looking for value-based care.

For 2020, the company expects Individual Medicare Advantage membership growth of 270,000 -330,000 members, indicating a 7.5-9.2% increase from the 2019 reported figure. Over the past decade, the company has seen maximum growth in Individual Medicare Advantage during 2019.

It recently signed an agreement to expand its alliance with Aledade, Inc. for improving value-based care. Aledade collaborates with various health institutions for the creation of Accountable Care Organizations (ACOs), which provide several health-based services. The deal, already in force, will likely enhance value-based care services in North Carolina for members participating in the Humana Medicare Advantage business.

Apart from working on its Medicare business, the company’s strategic initiatives have carved its growth path over time. Some of the acquisitions helped achieve long-term growth. Humana closed the Enclara deal, which is expected to boost its wide-ranging care package for meeting its pharmacy-based requirements associated with hospice care.

Humana has been efficiently deploying excess capital for the past several years. In 2019, its operating cash flows soared 143.2% year over year. It has been hiking its dividend since 2011. In February 2019, the company raised dividend by 10% to 55 cents per share. Later in July, the board of directors approved a new $3-BILLION share repurchase plan, replacing its previous buyback authorization, which is set to expire Jun 30, 2022. We believe that the company’s financial strength will continue to drive investors’ confidence.

Humana anticipates adjusted EPS in the band of $18.25-$18.75 for 2020, indicating an upside of 3.5% from the prior-year reported figure. Total revenues for the year are projected in the range of $73.9-$74.5 billion, the midpoint suggesting a 14.3% rise from the year-ago reported number.

Humana’s fourth-quarter 2019 operating earnings per share of $2.28 beat the Zacks Consensus Estimate by 3.6%.

Zacks Rank and Price Performance

Shares of this Zacks Rank #3 (Hold) company have rallied 23.5% in a year's time, outperforming its industry's growth of 7.2%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The performance looks good when compared with other companies in the same space, such as Centene Corporation CNC and Molina Healthcare, Inc MOH, which have lost 3.6% and 2.3% each in the same time frame, and Cigna Corporation CI, which has returned 11%.

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Humana Inc. (HUM): Free Stock Analysis Report
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