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Humana's Messy Mix

Thanks to the booming Medicare business, Humana (HUM - Get Report) sees better days ahead.

The company's third-quarter profit, while up more than threefold from a year ago, fell shy of Wall Street's lofty expectations. But the company's guidance should please investors who are focused on the future.

Humana reaffirmed its 2006 forecast for profits of $2.82 to $2.88 a share, with even the low end of that range topping the consensus estimate. Moreover, the company issued new 2007 earnings guidance of $3.90 to $4.10 a share that came in well ahead of Wall Street's current $3.50 target.

Meanwhile, however, Humana's latest results did miss the mark.

Third-quarter revenue jumped 48% to $5.65 billion but fell short of the $5.9 billion consensus estimate. Net income rocketed to $159 million from $46.8 million due to lucrative enrollment gains - particularly in the Medicare Advantage business - and the absence of year-ago charges. Earnings per share came in at 95 cents, matching the low end of management's guidance but missing Wall Street targets by 2 cents.

For its part, Humana still feels confident that it can hit its targets for the full year. Meanwhile, Humana credited "substantial earnings increases in both of the company's business segments" for its recent success.

As usual, Medicare proved to be the real story. The company saw its Medicare Advantage enrollment nearly double from a year ago, fast approaching the 1 million-member milestone.

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