Humana Crafts a 52-Week High - Analyst Blog

On Mar 19, 2014, shares of Humana Inc. HUM reached a new 52-week high of $117.51, after a series of positive tidings at the company.

The stock gained 69% in the 1-year period. Humana's year-to-date return of 13.31% was higher than the S&P 500's return of 0.67% and that of the other industry players, with UnitedHealth Group Incorporated UNH, and Cigna Corp. CI recording 6.19%, -8.23% returns, respectively.

Last month, Humana partnered with a leading healthcare innovation company, CoverMyMeds, to bring into force an electronic prior authorization model to offer patients an easy access to required medications. This initiative positions Humana to enhance the clinical experience of both the patients and providers, retaining customer confidence.

A week after the collaboration was announced, in Feb 2014, the company launched a product that augments qualitative care. The product is a modern and fully integrated health management platform – HealthLogix – that connects different electronic health record (EHR) systems to improve care coordination and generate better outcome.

While Humana focused on enhancing its portfolio through the above initiatives in a bid to capitalize on growth opportunities, last month it also received rating affirmation and an impressive outlook upgrade from popular credit rating agency, A.M. Best. Co. The rating agency affirmed the financial strength and issuer credit ratings, and upped the latter's outlook to stable from negative. The ratings reflect enhanced revenues, cost containment strategies and favorable operating performance in 2013, in turn, raising Human's creditworthiness and boosting investor confidence.

Although Humana reported dismal fourth-quarter 2013 results, Humana performed impressively with positive earnings surprises in three out of the last four quarters, generating an average beat of +12.8%. Moreover, its future growth prospects appear impressive given its focus on organic growth, proactive capital deployment and financial leverage reduction.

We remain optimistic about Humana and thus the Zacks Consensus Estimate for 2014 is pegged at $7.81 per share, higher then the company guided earnings range of $7.25–$7.75 per share while the same for 2015 stands at $8.73 per share, up 11.8% over 2014.

Humana currently carries a Zacks Rank #3 (Hold). Aetna Inc. AET is a better-ranked stock in the sector with a Zacks Rank #2 (Buy) and is worth considering.