Humana (HUM) Stock Skyrocketing on Sale Speculation

NEW YORK (TheStreet) -- Shares of Humana Inc. (HUM) are gaining by 17.83% to $210.22 on heavy volume in mid-afternoon trading on Friday, following reports that the company is looking into selling itself and has hired Goldman Sachs (GS) to help with the process, The Wall Street Journal reports.

The health insurer is said to have received indications of takeover interest with Cigna  (CI) and Aetna (AET) among those already in early stage discussions with Humana, sources told the Journal.

So far today, 4.08 million shares of Humana have exchanged hands as compared to its average daily volume of 1.34 million shares.

Were Humana to be acquired, it could result in a trend among health insurers to consolidate, The Journal noted, adding that there is the possibility that there will be no deal reached.

"While impossible to predict timing, there is a consistent theme of consolidation being openly discussed by a number of management teams in the sector," J.P. Morgan analysts wrote in a recent research note, the Journal said.

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 several positive factors, 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 robust revenue growth, largely solid financial position with reasonable debt levels by most measures, solid stock price performance, increase in net income and reasonable valuation levels. We feel its strengths outweigh the fact that the company shows weak operating cash flow."

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

  • HUM's revenue growth has slightly outpaced the industry average of 13.3%. Since the same quarter one year prior, revenues rose by 18.1%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The current debt-to-equity ratio, 0.38, 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 1.22, which illustrates the ability to avoid short-term cash problems.
  • Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 46.03% over the past year, a rise that has exceeded that of the S&P 500 Index. 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.
  • The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the Health Care Providers & Services industry average. The net income increased by 16.8% when compared to the same quarter one year prior, going from $368.00 million to $430.00 million.
  • You can view the full analysis from the report here: HUM Ratings Report

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