Humana (HUM) Stock Gains on Reported Takeover Bid From Aetna

NEW YORK (TheStreet) -- Humana (HUM) shares are up 0.35% to $203.02 in morning trading on Monday after the health insurer reportedly received a takeover bid from Aetna (AET) over the weekend, according to the Wall Street Journal.

Louisville, KY-based Humana is valued at approximately $30 billion with about 21.5 million total shareholders.

Aetna insures about 46 million people and has a market cap of about $43 billion.

The bid is part of a recent move towards consolidation in the health insurance industry as an unintended consequence of the Affordable Care Act, according to 24/7 Wall St.

Fellow health insurer Anthem (ANTM) made a bid to acquire Cigna (CI) for $53.8 billion, or $184 per share, an 18% premium over Cigna's closing price on Friday.

Cigna rejected Anthem's bid on Sunday saying, "The Cigna board has unanimously determined the proposal is inadequate and not in the best interests of Cigna's shareholders." Though the company also said that it would be open to a merger under the right circumstances, according to the Financial Times.

Aetna shares are up 4.11% to $129.17 in trading today.

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 a few notable 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 robust revenue growth, largely solid financial position with reasonable debt levels by most measures, solid stock price performance, increase in net income and growth in earnings per share. 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 13.0%. 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 59.61% 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.
  • HUMANA INC has improved earnings per share by 20.0% in the most recent quarter compared to 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 reported lower earnings of $7.33 versus $7.70 in the prior year. This year, the market expects an improvement in earnings ($8.66 versus $7.33).
  • You can view the full analysis from the report here: HUM Ratings Report

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