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Can Humana (HUM) Navigate Rising Expenses in Q2 Earnings?
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Humana Inc. (HUM - Free Report) is set to report its second-quarter 2024 results on Jul 31, before the opening bell.
The Zacks Consensus Estimate for second-quarter earnings per share of $5.89 indicates a decrease of 34.1% from the prior-year reported number of $8.94. The estimate remained stable over the past week. The consensus mark for second-quarter revenues of $28.6 billion indicates an 11.3% increase from the year-ago reported figure.
Image Source: Zacks Investment Research
Humana beat the earnings estimate in three of the past four quarters and missed once. This is depicted in the graph below:
Our proven model does not conclusively predict an earnings beat for Humana this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat, which is not the case here.
Earnings ESP: The company has an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Humana currently holds a Zacks Rank #4 (Sell).
Now, let’s see how things have shaped up prior to the second-quarter 2024 earnings announcement.
Factors Driving Q2 Performance
In the second quarter, Humana’s revenues are expected to have benefited from higher premiums resulting from its well-devised Medicare Advantage plans and higher investment income. Several contract wins and an expanding pharmacy business are likely to have contributed to the growing top line.
The Zacks Consensus Estimate for HUM’s second-quarter premiums indicates a 6.7% increase from the prior-year quarter’s reported figure, whereas our model predicts 5.2% growth. We expect Medicare Advantage membership to witness 5.4% growth in the quarter under review. Furthermore, the consensus estimate suggests that HUM’s investment income will see a nearly 33% jump from the year-ago level.
The CenterWell segment is expected to have gained a strong provider services business. We expect the operating cost ratio at CenterWell to improve 90 basis points to 91.7% in the second quarter, aiding its margins. The Zacks Consensus Estimate for the segment’s operating income indicates an 18.2% increase from the prior-year quarter’s reported figure.
However, continued investments in marketing and distribution, and higher benefits have increased costs for the company. These headwinds are anticipated to have affected its margins in the second quarter.
Our model estimate for HUM’s total operating expenses indicates a 7.1% year-over-year increase. With seniors resuming elective procedures that were put on hold earlier, costs have significantly risen for insurers.
The Insurance segment is likely to have been driven by a growing membership in Medicare Advantage and state-based contracts. However, decreasing memberships in Stand-Alone PDPs and total Specialty Medical is likely to have partially offset the upside.
Also, rising benefits and operating costs are expected to have affected Insurance segment profits. The Zacks Consensus Estimate for the unit’s pretax income indicates an almost 21% decline from the prior-year quarter’s reported figure. Nevertheless, the growth in its CenterWell unit is expected to play a major role in giving its bottom line some respite in the second quarter.
Price Performance
Humana’s stock has exhibited a downward movement, shedding a notable percentage in the year-to-date period. The stock has plunged 14.3% against the industry’s rise of 6.2%. Additionally, the stock underperformed the S&P 500 Index, which rallied 14.6% in the same time frame.
YTD Price Performance
Image Source: Zacks Investment Research
Conclusion
The continued decline of membership levels in Stand-Alone PDPs and total Specialty Medical and rising expensesare likely to have hurt the bottom line of Humana in the to-be-reported quarter. This is likely to make an earnings beat uncertain in the second quarter despite rising premiums and investment income.
Stocks That Warrant a Look
Here are some other companies from the broader Medical space that you may also want to consider, as our model shows that these have the right combination of elements to post an earnings beat this time around:
The Zacks Consensus Estimate for Cigna’s bottom line for the to-be-reported quarter is pegged at $6.42 per share, which was revised upward by a penny in the past month. The estimate indicates 4.7% year-over-year growth. The consensus estimate for CI’s revenues is pegged at $58.5 billion, indicating a 20.3% increase from a year ago.
Encompass Health Corporation (EHC - Free Report) has an Earnings ESP of +0.36% and is a Zacks #3 Ranked player.
The Zacks Consensus Estimate for Encompass Health’s bottom line for the to-be-reported quarter is pegged at $1.01 per share, which implies a 6.3% year-over-year rise. The consensus estimate for EHC’s revenues is pegged at $1.3 billion, a 9.9% jump from a year ago. It beat earnings estimates in each of the past four quarters, with an average surprise of 18.7%.
Addus HomeCare Corporation (ADUS - Free Report) has an Earnings ESP of +0.17% and a Zacks Rank of 3.
The Zacks Consensus Estimate for Addus HomeCare's bottom line for the to-be-reported quarter is pegged at $1.20 per share, indicating a 12.2% year-over-year increase. It beat earnings estimates in each of the past four quarters, with an average surprise of 10.1%. The consensus estimate for ADUS’ revenues is pegged at $283.8 million, implying a 9.2% increase from the year-ago period.
Image: Bigstock
Can Humana (HUM) Navigate Rising Expenses in Q2 Earnings?
Humana Inc. (HUM - Free Report) is set to report its second-quarter 2024 results on Jul 31, before the opening bell.
The Zacks Consensus Estimate for second-quarter earnings per share of $5.89 indicates a decrease of 34.1% from the prior-year reported number of $8.94. The estimate remained stable over the past week. The consensus mark for second-quarter revenues of $28.6 billion indicates an 11.3% increase from the year-ago reported figure.
Image Source: Zacks Investment Research
Humana beat the earnings estimate in three of the past four quarters and missed once. This is depicted in the graph below:
Humana Inc. Price and EPS Surprise
Humana Inc. price-eps-surprise | Humana Inc. Quote
Q2 Earnings Whispers
Our proven model does not conclusively predict an earnings beat for Humana this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat, which is not the case here.
Earnings ESP: The company has an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Humana currently holds a Zacks Rank #4 (Sell).
Now, let’s see how things have shaped up prior to the second-quarter 2024 earnings announcement.
Factors Driving Q2 Performance
In the second quarter, Humana’s revenues are expected to have benefited from higher premiums resulting from its well-devised Medicare Advantage plans and higher investment income. Several contract wins and an expanding pharmacy business are likely to have contributed to the growing top line.
The Zacks Consensus Estimate for HUM’s second-quarter premiums indicates a 6.7% increase from the prior-year quarter’s reported figure, whereas our model predicts 5.2% growth. We expect Medicare Advantage membership to witness 5.4% growth in the quarter under review. Furthermore, the consensus estimate suggests that HUM’s investment income will see a nearly 33% jump from the year-ago level.
The CenterWell segment is expected to have gained a strong provider services business. We expect the operating cost ratio at CenterWell to improve 90 basis points to 91.7% in the second quarter, aiding its margins. The Zacks Consensus Estimate for the segment’s operating income indicates an 18.2% increase from the prior-year quarter’s reported figure.
However, continued investments in marketing and distribution, and higher benefits have increased costs for the company. These headwinds are anticipated to have affected its margins in the second quarter.
Our model estimate for HUM’s total operating expenses indicates a 7.1% year-over-year increase. With seniors resuming elective procedures that were put on hold earlier, costs have significantly risen for insurers.
The Insurance segment is likely to have been driven by a growing membership in Medicare Advantage and state-based contracts. However, decreasing memberships in Stand-Alone PDPs and total Specialty Medical is likely to have partially offset the upside.
Also, rising benefits and operating costs are expected to have affected Insurance segment profits. The Zacks Consensus Estimate for the unit’s pretax income indicates an almost 21% decline from the prior-year quarter’s reported figure. Nevertheless, the growth in its CenterWell unit is expected to play a major role in giving its bottom line some respite in the second quarter.
Price Performance
Humana’s stock has exhibited a downward movement, shedding a notable percentage in the year-to-date period. The stock has plunged 14.3% against the industry’s rise of 6.2%. Additionally, the stock underperformed the S&P 500 Index, which rallied 14.6% in the same time frame.
YTD Price Performance
Image Source: Zacks Investment Research
Conclusion
The continued decline of membership levels in Stand-Alone PDPs and total Specialty Medical and rising expensesare likely to have hurt the bottom line of Humana in the to-be-reported quarter. This is likely to make an earnings beat uncertain in the second quarter despite rising premiums and investment income.
Stocks That Warrant a Look
Here are some other companies from the broader Medical space that you may also want to consider, as our model shows that these have the right combination of elements to post an earnings beat this time around:
The Cigna Group (CI - Free Report) has an Earnings ESP of +1.59% and a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Cigna’s bottom line for the to-be-reported quarter is pegged at $6.42 per share, which was revised upward by a penny in the past month. The estimate indicates 4.7% year-over-year growth. The consensus estimate for CI’s revenues is pegged at $58.5 billion, indicating a 20.3% increase from a year ago.
Encompass Health Corporation (EHC - Free Report) has an Earnings ESP of +0.36% and is a Zacks #3 Ranked player.
The Zacks Consensus Estimate for Encompass Health’s bottom line for the to-be-reported quarter is pegged at $1.01 per share, which implies a 6.3% year-over-year rise. The consensus estimate for EHC’s revenues is pegged at $1.3 billion, a 9.9% jump from a year ago. It beat earnings estimates in each of the past four quarters, with an average surprise of 18.7%.
Addus HomeCare Corporation (ADUS - Free Report) has an Earnings ESP of +0.17% and a Zacks Rank of 3.
The Zacks Consensus Estimate for Addus HomeCare's bottom line for the to-be-reported quarter is pegged at $1.20 per share, indicating a 12.2% year-over-year increase. It beat earnings estimates in each of the past four quarters, with an average surprise of 10.1%. The consensus estimate for ADUS’ revenues is pegged at $283.8 million, implying a 9.2% increase from the year-ago period.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.