Thursday, February 3, 2011

Humana Inc. (NYSE: HUM): Q4 Earnings Preview 2010

Humana Inc. (NYSE: HUM) is scheduled to release its fourth-quarter earnings before the opening bell on Monday, February 7, 2011.  Analysts, on average, currently expect the company to report a net earnings of 81 cents a share on revenue of $8.36 billion. In the year ago quarter, the company reported earnings of $1.48 per share on revenue of $7.63 billion.

Humana Inc. provides various health and supplemental benefit plans for employer groups, government benefit programs, and individuals in the United States. The company operates in two segments, Government and Commercial. It is one of the nation's largest Medicare providers and over the last several years, the majority of Humana's enrollees have been in state- or federal-government-sponsored programs.

In the preceding third-quarter, the Louisville, Kentucky-based company's net income was $393.2 million, or $2.32 a share, compared to $301.5 million, or $1.78 a share, in the year-ago quarter. Revenue increased 9.2% to $8.42 billion from $7.72 billion. Analysts, on average, expect the company to report earnings of $1.66 per share on revenue of $8.46 billion. 

At its last earnings call in November, the company boosted its full-year 2010 outlook. The company now anticipates EPS of approximately $6.40 to $6.50 for the year ending December 31, 2010 (FY10) reflecting the improved operating performance and the expectation of a TRICARE contract extension. Previously, the company expected full year earnings in the range of $5.65 to $5.75 range. Consolidated revenues are now estimated in the range of $33.5 billion to $34.0 billion, compared to the prior forecast of $33.5 billion to $34.5 billion. 

In December, the company raised its fiscal 2011 earnings guidance. The company said it now expects consolidated earnings per share for the full year 2011 of $5.45 to $5.65, compared to its prior expectations of $5.35 to $5.55 per share.

In December, the company also announced that  that it has completed its acquisition of Concentra Inc., a privately held health care company based in Addison, Texas, for about $790 million in cash. Humana said its consolidated revenues for the year ending December 31, 2011 are expected to increase by about $800 million in connection with the acquisition. The acquisition of Concentra will help in increasing Humana’s focus on its core businesses as a health care provider, besides providing revenue diversification and opportunities for strategic expansion over the longer term. Additionally, Concentra will provide access to Humana’s medical members in certain regions. The revenue diversification enjoyed by Humana will also help reduce its exposure to health care overhaul regulations, as the health law seeks to compress an insurer’s profits from selling benefits. Humana will also benefit from Concentra’s focus on evidence-based, cost-effective medical care and a service-driven culture. The acquisition gives Humana “both revenue diversification and opportunities for strategic expansion longer term,” said Michael B. McCallister, Humana’s chief executive officer, in the statement.

In January, the company said that it expects gross sales for Medicare Advantage for 2011 to be modestly higher than expected, with net growth slightly higher than the company's previous expectation of 60,000 to 65,000. Gross sales for stand-alone Prescription Drug Plans are expected to be higher than expected with respect to the Humana-Walmart Preferred plan, and in line with previous projections with respect to the company's other plans. Net growth in the company's stand-alone Prescription Drug Plans is expected to be higher than the Company's previous expectation of 325,000 to 375,000. 

Humana is positive about its Medicare Advantage program to grow over the longer-term due to the healthcare overhaul passed in March 2010. Over the long term also, Humana will be in a favorable position as demographic and reform-related trends expand Medicare and the individual market.

Recently, the health insurer said that is on target with enrollments and is on the look-out for further acquisitions that could increase vertical integration.

Full Disclosure: None.

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