Why Humana (HUM) Hit a One-Year High Today

NEW YORK (TheStreet) -- Humana  (HUM) hit a one-year high of $112.78 as of 12:48 p.m. EST on Monday afternoon after the proposed government cuts to the Medicare Advantage program were less than expected.

The Louisville-based company is the second-largest Medicare Advantage insurer, and the company led insurance stocks higher on Monday as it surged. The federal government announced on Friday that health insurers that run Medicare Advantage, the private version of the government's program, would deal with a base payment cut of approximately 3.55% next year. Humana estimated on Monday that the reduction would total 3.5% to 4%, down from its previous estimate of 6% to 7%, according to Bloomberg.

The proposed cuts are subject to negotiations and would not become final until April 7.

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 multiple strengths, 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 solid stock price performance, revenue growth, largely solid financial position with reasonable debt levels by most measures and reasonable valuation levels. We feel these strengths outweigh the fact that the company has had sub par growth in net income."

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

  • Compared to its closing price of one year ago, HUM's share price has jumped by 40.82%, exceeding the performance of the broader market during that same time frame. Regarding the stock's future course, although almost any stock can fall in a broad market decline, HUM should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • Despite its growing revenue, the company underperformed as compared with the industry average of 11.1%. Since the same quarter one year prior, revenues slightly increased by 6.6%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • HUM's debt-to-equity ratio is very low at 0.28 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, HUM has a quick ratio of 1.61, which demonstrates the ability of the company to cover short-term liquidity needs.
  • HUMANA INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, HUMANA INC increased its bottom line by earning $7.70 versus $7.46 in the prior year. This year, the market expects an improvement in earnings ($7.75 versus $7.70).
  • You can view the full analysis from the report here: HUM Ratings Report

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