Can Humana (HUM) Sustain Its Earnings Beat Streak in Q3?

Humana Inc. HUM is slated to report third-quarter 2022 results on Nov 2, before the market opens.

Q3 Estimates

The Zacks Consensus Estimate for Humana’s third-quarter earnings per share (EPS) is pegged at $6.25, indicating an improvement of 29.4% from the prior-year quarter’s reported figure. Our estimate suggests an EPS of $6.20 for the to-be-reported quarter.

The consensus mark for revenues stands at $22.8 billion, suggesting 10.2% growth from the year-ago quarter’s reported number. Our estimate for the metric matches the consensus mark.

Earnings Surprise History

Humana boasts an impressive earnings surprise history. Its bottom line beat estimates in each of the trailing six quarters. This is depicted in the chart below:

Humana Inc. Price and EPS Surprise

Humana Inc. Price and EPS Surprise

Humana Inc. price-eps-surprise | Humana Inc. Quote

What Our Quantitative Model Unveils

Our proven model predicts 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 odds of an earnings beat, which is precisely the case here.

Earnings ESP: Humana has an Earnings ESP of +1.32% because the Most Accurate Estimate of $6.33 is pegged higher than the Zacks Consensus Estimate of $6.25. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter.

Zacks Rank: Humana currently carries a Zacks Rank #2. You can see the complete list of today's Zacks #1 Rank stocks here.

Factors to Note

In the third quarter, Humana’s revenues are expected to have benefited from improved premiums resulting from its well-devised Medicare Advantage and Medicaid plans. Numerous contract wins and an expanding customer base are likely to have contributed to growing premiums.

The Zacks Consensus Estimate for HUM’s third-quarter Medicare premiums is pegged at $18.4 billion, indicates a 9% improvement from the prior-year quarter’s reported figure. The consensus mark for its Medicaid and other premiums stands at $1.6 billion, suggesting a 19.6% rise from the prior-year quarter’s reported figure.

Solid performances of the Retail, Healthcare Services, and Group and Specialty segments are likely to have provided an impetus to Humana’s quarterly results in the to-be-reported quarter.

The Retail segment is likely to have been driven by a growing Medicaid membership. The Zacks Consensus Estimate for the segment’s pretax income is $612 million, indicating a 34.2% surge from the prior-year quarter’s reported figure. Our estimate for the same stands at $612.5 million.

Results of HUM’s Healthcare Services segment are expected to have gained on a strong pharmacy business and a better mail-order pharmacy penetration for individual Medicare Advantage members in the third quarter. The consensus mark for the segment’s pretax income stands at $725 million (which indicates more than doubling the year-ago quarter’s reported figure), while our estimate for the metric stands at $725.1 million.

A well-performing specialty business and lower dental utilization trends might have contributed to the Group and Specialty segment’s sound performance in the to-be-reported quarter.

However, continued investments in marketing and distribution are likely to have escalated costs for Humana, which in turn, might have squeezed its margins in the third quarter. Nevertheless, the downside is likely to have been partly offset by lower utilization trends and subsiding COVID-linked headwinds.

Other Stocks to Consider

Here are some other companies worth considering from the Medical space, as our model shows that these too have the right combination of elements to beat on earnings this time around:

Immunocore Holdings plc IMCR has an Earnings ESP of +58.23% and a Zacks Rank of 1 at present. The Zacks Consensus Estimate for IMCR’s third-quarter 2022 earnings stands at a loss of 26 cents per share, narrower than the prior-year quarter’s loss of 95 cents.

Immunocore’s bottom line outpaced estimates in three of the trailing four quarters and missed the mark once, the average surprise being 33.28%.

AVEO Pharmaceuticals, Inc. AVEO has an Earnings ESP of +8.16% and a Zacks Rank of 2, currently. The Zacks Consensus Estimate for AVEO’s third-quarter 2022 earnings is pegged at a loss of 16 cents per share, narrower than the prior-year quarter’s loss of 30 cents.

AVEO Pharmaceuticals’ earnings beat estimates in three of the trailing four quarters and missed the mark once, the average surprise being 13.10%.

Pediatrix Medical Group, Inc. MD has an Earnings ESP of +1.65% and a Zacks Rank #3 at present. The Zacks Consensus Estimate for MD’s third-quarter 2022 earnings is pegged at 53 cents per share, suggesting an improvement of 15.2% from the prior-year quarter’s reported number.

Pediatrix Medical’s bottom line surpassed estimates in three of the trailing four quarters and matched the mark once, the average surprise being 12.48%.

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