Humana Inc. HUM is set to continue its earnings beat streak in the second quarter of 2023, the results for which are expected to be released on Aug 2, before the opening bell.
What Do the Estimates Say?
The Zacks Consensus Estimate for second-quarter earnings per share of $8.88 suggests an increase of 2.4% from the prior-year reported number. The estimate remained stable over the past week. The consensus mark for second-quarter revenues of $25.8 billion indicates a 9.1% increase from the year-ago reported figure.
Humana beat the earnings estimate in all the prior four quarters, with the average being 8.9%. This is depicted in the graph below:
Humana Inc. Price and EPS Surprise
Humana Inc. price-eps-surprise | Humana Inc. Quote
What the Quantitative Model Suggests
Our proven model predicts a likely earnings beat for Humana this time around as well. 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 precisely the case here.
Earnings ESP: The company has an Earnings ESP of +0.76%. The Most Accurate Estimate is pegged at $8.94 per share, higher than the Zacks Consensus Estimate of $8.88. 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 #2.
Before we get into what to expect in the to-be-reported quarter in detail, let’s see how the company performed in the last quarter.
Q1 Earnings Rewind
In the last reported quarter, the company reported adjusted earnings per share of $9.38, beating the Zacks Consensus Estimate by 1.4%, due to growing premiums coupled with solid segmental performances. Favorable trends of inpatient utilization added to the positives. However, the upside was partly hurt by an elevated operating expense level.
Now, let’s see how things have shaped up prior to the second-quarter 2023 earnings announcement.
Factors Driving Better-Than-Expected Q2 Earnings
In the second quarter, Humana’s revenues are expected to have benefited from improved premiums resulting from its well-devised Medicare Advantage and Medicaid plans and higher investment income. Several contract wins and an expanding pharmacy business are likely to have contributed to growing premiums.
Our estimate for HUM’s second-quarter premiums indicates more than 10% improvement from the prior-year quarter’s reported figure. Our estimate for its Medicaid and other premiums indicates a 20.3% rise from the prior-year quarter’s reported figure. We expect total Medicare to have witnessed more than 11% growth in the quarter under review.
The Insurance segment is likely to have been driven by a growing membership in Medicare Advantage and state-based contracts. Our estimate for the segment’s pretax income is pegged at $1,138.3 million, indicating an almost 3% increase from the prior-year quarter’s reported figure.
The CenterWell segment is expected to have gained on a strong pharmacy business. Our estimate for the segment’s pretax income is pegged at $510.8 million, indicating a nearly 43% increase from the prior-year quarter’s reported figure. Furthermore, our model suggests that HUM’s investment income will see a more than 322% jump from the year-ago level.
The above-mentioned factors are expected to have positioned the company for a year-over-year increase and an earnings beat in the second quarter. However, continued investments in marketing and distribution, and higher benefits are likely to have escalated costs for Humana, which, in turn, are likely to have squeezed its margins in the second quarter. Our estimate for total operating expenses indicates a 7.8% year-over-year increase.
Nevertheless, the downside is likely to have been partly offset by lower utilization trends. Our estimate for the insurance benefit ratio is pegged at 86%, indicating a marginal improvement from the year-ago level of 86.1%.
Other 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 too have the right combination of elements to post an earnings beat this time around:
Community Health Systems, Inc. CYH has an Earnings ESP of +33.72% and is a Zacks #2 Ranked player. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Community Health’s bottom line for the to-be-reported quarter indicates an improvement of 88.5% from the year-ago period. The consensus mark for CYH’s revenues is pegged at more than $3 billion, indicating 2.9% year-over-year growth.
Avadel Pharmaceuticals plc AVDL has an Earnings ESP of +3.23% and a Zacks Rank #2.
The Zacks Consensus Estimate for Avadel’s bottom line for the to-be-reported quarter signals a 22% year-over-year improvement. The estimate remained stable over the past week. The consensus mark for AVDL’s revenues is pegged at $1.3 million.
SI-BONE, Inc. SIBN has an Earnings ESP of +12.20% and is a Zacks #2 Ranked player.
The Zacks Consensus Estimate for SI-BONE’s earnings per share for the to-be-reported quarter suggests an improvement of 24.1% from the year-ago period. SIBN beat earnings estimates thrice in the past four quarters and missed once, the average surprise being 11.1%.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.
Top 5 ChatGPT Stocks Revealed
Zacks Senior Stock Strategist, Kevin Cook names 5 hand-picked stocks with sky-high growth potential in a brilliant sector of Artificial Intelligence. By 2030, the AI industry is predicted to have an internet and iPhone-scale economic impact of $15.7 Trillion.
Today you can invest in the wave of the future, an automation that answers follow-up questions … admits mistakes … challenges incorrect premises … rejects inappropriate requests. As one of the selected companies puts it, “Automation frees people from the mundane so they can accomplish the miraculous.”
Humana Inc. (HUM) : Free Stock Analysis Report
Community Health Systems, Inc. (CYH) : Free Stock Analysis Report
Avadel Pharmaceuticals PLC. (AVDL) : Free Stock Analysis Report
SiBone (SIBN) : Free Stock Analysis Report
To read this article on Zacks.com click here.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
