Saturday, April 30, 2011

Humana Inc. (NYSE: HUM): Q1 Earnings Preview 2011

Humana Inc. (NYSE: HUM) is scheduled to release its first-quarter earnings before the opening bell on Monday, May 2, 2011.  Analysts, on average, expect the company to report earnings of $1.36 a share on revenue of $9.14 billion. In the year ago quarter, the company reported earnings of $1.52 per share on revenue of $8.44 billion.

Humana Inc. provides various health and supplemental benefit plans for employer groups, government benefit programs, and individuals in the United States. 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 fourth-quarter, the Louisville, Kentucky-based company's net income was $107.33 million, or 63 cents per share, compared to $250.66 million, or $1.48 per share, in the year-ago quarter. The results included $1.02 per share of incremental expenses, reflecting reserves strengthening for closed block of long-term care business, incremental spending associated with the change in Medicare Advantage enrollment periods, and the launch of the Humana Walmart-Preferred Rx Plan among others.Revenue increased 9.2% to $8.42 billion from $7.72 billion. Analysts, on average, currently expected the company to report earnings of 81 cents a share on revenue of $8.36 billion.

The company recently announced that it has realigned its business segments and will start paying a quarterly dividend. The company raised its fiscal 2011 earnings outlook and said it now expects first-quarter earnings to exceed its previous guidance. It has also gotten authorization to increase share repurchases to $1 billion from $250 million. Effective immediately, the Louisville, Kentucky-based company will report its operating results under the following segments - Retail, Employer Group, Health and Well-Being Services and Other Businesses. The company's board of directors approved a quarterly cash dividend policy and declared a cash dividend to stockholders of $0.25 per share, payable on July 28, 2011 to stockholders of record on June 30, 2011. The board also replaced its previously approved share repurchase authorization of up to $250 million with a new authorization for repurchases of up to $1 billion by June 30, 2013. The previous share repurchase authorization had about $100 million outstanding as of April 25, 2011.

The company said that it now expects first earnings per share of $1.86, exceeding the company's previous guidance of $1.15 to $1.20 per share. Humana said that the better-than-expected results reflect a lower-than-expected benefit ratio for the quarter and include the impact of favorable prior-year development in medical claims reserves of $0.31 per share. Humana has also raised its outlook for fiscal year 2011 earnings per share to a range of $6.70 to $6.90 from the prior range of $5.95 to $6.15 per share.

Late in February, the U.S. Department of Defense awarded the South Region TRICARE contract to the company's wholly owned subsidiary, Humana Military Healthcare Services Inc.

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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