Humana (HUM) Stock Falls as UnitedHealth Reconsiders Participation in Affordable Care Act

Humana (HUM) stock is declining in early afternoon trading on Thursday, after UnitedHealth Group (UNH) said it was reconsidering its participation in the Affordable Care Act.
By Amanda Albright ,

NEW YORK (TheStreet) -- Humana  (HUM) - Get Report stock is falling by 3.94% to $164.34 in mid-afternoon trading on Thursday, after UnitedHealth Group (UNH) said it was reconsidering its use of Affordable Care Act exchanges. 

The biggest U.S. health insurer said it expects as much as $500 million in losses on the Obamacare plans in 2016, Bloomberg reports.

Additionally, UnitedHealth will reduce its marketing for individual exchange products in 2016, the company said in a statement on Thursday.

"In recent weeks, growth expectations for individual exchange participation have tempered industry-wide, co-operatives have failed, and market data has signaled higher risks and more difficulties while our own claims experience has deteriorated, so we are taking this proactive step," CEO Stephen Hemsley said in a statement.

Other health insurance stocks such as Aetna (AET) and Anthem (ANTM) are also declining in early afternoon trading. 

Humana is a a health insurance company based in Louisville. 

Separately, TheStreet Ratings team rates HUMANA INC as a Buy with a ratings score of B+. TheStreet Ratings Team has this to say about their recommendation:

We rate HUMANA INC (HUM) a BUY. This is driven by some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its increase in net income, revenue growth, largely solid financial position with reasonable debt levels by most measures, reasonable valuation levels and good cash flow from operations. We feel its strengths outweigh the fact that the company shows low profit margins.

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The net income growth from the same quarter one year ago has greatly exceeded that of the S&P 500, but is less than that of the Health Care Providers & Services industry average. The net income increased by 8.3% when compared to the same quarter one year prior, going from $290.00 million to $314.00 million.
  • Despite its growing revenue, the company underperformed as compared with the industry average of 10.2%. Since the same quarter one year prior, revenues slightly increased by 9.2%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The current debt-to-equity ratio, 0.37, is low and is below the industry average, implying that there has been successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.29, which illustrates the ability to avoid short-term cash problems.
  • The stock has not only risen over the past year, it has done so at a faster pace than the S&P 500, reflecting the earnings growth and other positive factors similar to those we have cited here. The stock's price rise over the last year has driven it to a level which is somewhat expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
  • You can view the full analysis from the report here: HUM

Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of Jim Cramer, TheStreet or any of its contributors.

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