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Here's Why You Should Add Humana (HUM) to Your Portfolio

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Humana Inc. (HUM - Free Report) is well poised to grow on the back of solid Medicare business and an upbeat 2020 guidance.

Over the past 30 days, the stock has witnessed its 2020 and 2021 earnings estimates move 0.1% and 0.3% upward, respectively.

It has an impressive Value Score of A and a Zacks Rank #2 (Buy), currently. Our research shows that stocks with a Value Style Score of A or B when combined with a Zacks Rank #1 (Strong Buy) or 2 offer the best opportunities in the value investing space.

Here we shall briefly discuss the reasons for adding this health insurance company to your investment portfolio. You can see the complete list of today’s Zacks #1 Rank stocks here.

It recently reported second-quarter 2020 operating earnings per share of $12.56, which beat the Zacks Consensus Estimate by 21.5% and also soared 107.6% year over year on the back of higher revenues.

For 2020, the company reaffirmed its adjusted EPS projection of $18.25-$18.75, indicating an upside of 3.5% from the prior-year reported figure following solid second-quarter results. The full-year individual Medicare Advantage membership is anticipated to be around 330,000-360,000. Humana expects an increase of 90,000 members in 2020, implying growth from the year-ago reported number. This robust outlook should instill investors’ confidence in the stock.

Humana’s Medicare business has been performing strongly over the past many quarters. This is evident from 54% Medicare membership growth during the 2013-2018 period. In 2019, Individual Medicare membership rose 17.1% year over year, which is a positive. The current-year individual Medicare Advantage membership is now anticipated to be around 330,000-360,000 members, up from the earlier projected range of 300,000-350,000 members.

Over the past decade, the company saw maximum growth in Individual Medicare Advantage during 2019.

Acquisitions and dispositions paved a growth path for the company. Some of its major purchases include the Family Physicians Group, Your Home Advantage, Curo and a share in Kindred at Home. It also closed the Enclara deal in January 2020, expanding its hospice pharmacy business line. These strategic initiatives bode well for the long haul.

Humana  has been efficiently deploying excess capital for the past several years. Its operating cash flows soared 143.2% and 52%, respectively, in 2019 and during the first half of 2020. Humana has been hiking its dividend since 2011. In February 2020, the company raised its quarterly dividend by 14%. We believe, its financial strength will continue to boost investors’ confidence.Humana has been able to undertake all these measures on the back of its sturdy capital position. Its total debt is 35.1% of capital, comparing favorably with the industry’s average of 38.2%. Also, its time interest earned stands at 19.7X, much higher than the industry average of 12.4X. As of Jun 30, 2020, the company had cash, cash equivalents and investment securities worth $20 billion, higher than its long-term debt of $6 billion. Thus, its solvency level impresses.

Price Performance

Shares of this company have surged 41.7% in a year’s time compared with the industry’s rally of 21%.



The performance looks stronger than other companies’ stock movements in the same space, such as Centene Corporation (CNC - Free Report) , Anthem Inc. and The Joint Corp (JYNT - Free Report) , which have gained 35%, 4.9% and 3.6%, respectively, in the same time frame.

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