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Humana (HUM) Hikes Guidance: Here's Why It's a Good Sign
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Shares of Humana Inc. (HUM - Free Report) jumped 8.4% yesterday after it issued an upbeat guidance. With medical costs staying down and COVID-19 headwinds not materializing so far, the company bumped up its 2022 earnings guidance and gave a bright outlook for 2025.
From the previous 2022 adjusted EPS guidance of $24.75, HUM increased the estimate to around $25, reflecting 21% growth from last year. Lower-than-expected medical costs in its Medicaid and Medicare Advantage businesses helped in boosting the profit guidance. Further, the reduced effects of COVID-19 this year are boosting the bottom line.
Earlier, Humana reserved 50 cents of the estimate for COVID-related headwinds, of which, it released 25 cents in EPS guidance and the remaining 25 cents will likely be invested in marketing the 2023 Medicare Advantage Annual Election Period if not utilized in the greater-than-expected flu season or other cases.
Humana also targets adjusted earnings of $37 per share for 2025, signaling a 14% CAGR over the updated 2022 guidance. Its $1 billion value creation move is expected to increase operating efficiency, which will support its move toward the aforementioned target. The insurer is expected to release its third-quarter results on Nov 2, 2022.
What Does It Mean for the Industry?
HUM shaking off the discrete COVID-19 headwinds from its guidance is an important milestone for the Medical - HMOs space. This will provide companies like HUM, UnitedHealth Group Incorporated (UNH - Free Report) , Centene Corporation (CNC - Free Report) and Molina Healthcare, Inc. (MOH - Free Report) the chance of lowering costs and increasing the bottom line. Also, Humana’s 14% CAGR adjusted EPS estimate paints the picture of a healthy long-term path for the industry.
The increased profit outlook from Humana helped its peers too. Shares of UnitedHealth, Centene and Molina Healthcare jumped 2.6%, 2.5% and 1.7%, respectively, yesterday. Health insurers faced significant cost fluctuations during the pandemic.
While higher COVID-19-related claims boosted costs, decreased elective medical procedure spending partially offset the impacts. With the severity of the pandemic declining, general elective procedures and hospitalizations are coming back on track.
Image: Bigstock
Humana (HUM) Hikes Guidance: Here's Why It's a Good Sign
Shares of Humana Inc. (HUM - Free Report) jumped 8.4% yesterday after it issued an upbeat guidance. With medical costs staying down and COVID-19 headwinds not materializing so far, the company bumped up its 2022 earnings guidance and gave a bright outlook for 2025.
From the previous 2022 adjusted EPS guidance of $24.75, HUM increased the estimate to around $25, reflecting 21% growth from last year. Lower-than-expected medical costs in its Medicaid and Medicare Advantage businesses helped in boosting the profit guidance. Further, the reduced effects of COVID-19 this year are boosting the bottom line.
Earlier, Humana reserved 50 cents of the estimate for COVID-related headwinds, of which, it released 25 cents in EPS guidance and the remaining 25 cents will likely be invested in marketing the 2023 Medicare Advantage Annual Election Period if not utilized in the greater-than-expected flu season or other cases.
Humana also targets adjusted earnings of $37 per share for 2025, signaling a 14% CAGR over the updated 2022 guidance. Its $1 billion value creation move is expected to increase operating efficiency, which will support its move toward the aforementioned target. The insurer is expected to release its third-quarter results on Nov 2, 2022.
What Does It Mean for the Industry?
HUM shaking off the discrete COVID-19 headwinds from its guidance is an important milestone for the Medical - HMOs space. This will provide companies like HUM, UnitedHealth Group Incorporated (UNH - Free Report) , Centene Corporation (CNC - Free Report) and Molina Healthcare, Inc. (MOH - Free Report) the chance of lowering costs and increasing the bottom line. Also, Humana’s 14% CAGR adjusted EPS estimate paints the picture of a healthy long-term path for the industry.
The increased profit outlook from Humana helped its peers too. Shares of UnitedHealth, Centene and Molina Healthcare jumped 2.6%, 2.5% and 1.7%, respectively, yesterday. Health insurers faced significant cost fluctuations during the pandemic.
While higher COVID-19-related claims boosted costs, decreased elective medical procedure spending partially offset the impacts. With the severity of the pandemic declining, general elective procedures and hospitalizations are coming back on track.
One-Year Price Performance
Humana’s shares have increased 24.6% in the past year compared with the 21.8% rise in the industry it belongs to. The company currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Image Source: Zacks Investment Research