Humana profit beats Street view and forecast shines
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Mon, 29 Oct 2007 15:50:00 GMT |
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By Lewis KrauskopfNEW YORK (Reuters) - Humana Inc posted sharply higher profit on Monday, above Wall Street's target, on continued strength in its Medicare health plans for the elderly and its plans for employers, and forecast next year's earnings ahead of expectations.Shares of the health insurer jumped 2.5 percent, helped by its bullish projection that it would add at least 200,000 members to its full-service Medicare Advantage plans."Humana is the latest in a string of companies to report higher Medicare earnings and an optimistic 2008 Medicare outlook," CIBC analyst Carl McDonald said in a research note.Humana shares have outperformed other large health insurers this year as the company aggressively expands its Medicare business, taking advantage of a larger private-sector role under the U.S. government health program for the elderly.Shares rose as much 7.8 percent to $81.44 -- an all-time high -- in opening trading before giving back some of those gains. The shares were up $1.86 at $77.42 in late-morning trading.Third-quarter net income rose to $302.4 million, or $1.78 per share, from $159.2 million, or 95 cents per share, a year earlier.Excluding special items, earnings of $1.53 per share beat the analysts' average forecast by 5 cents, according to Reuters Estimates.The Louisville, Kentucky-based company said improvements in its Medicare prescription-drug plans and commercial plans for employers had helped results beat expectations.Revenue increased 12 percent to $6.32 billion.Membership in the company's Medicare Advantage plans grew to 1.14 million at September 30, up by 145,000 from a year earlier.Humana, one of the largest Medicare providers, projected enrolling 200,000 to 250,000 more Medicare Advantage members during 2008.Goldman Sachs analyst Matthew Borsch called the 2008 outlook "very strong," with the Medicare Advantage enrollment projections exceeding his expectations.Membership in Medicare plans offering only prescription-drug benefits totaled 3.46 million at the end of the quarter, down about 60,000 from a year ago, but up 20,000 from the second quarter.The company's medical expense ratio, a key profitability measure of premium revenue spent on medical costs, improved to 81.3 percent from 84.1 percent a year earlier.Excluding items, Humana estimated full-year 2007 earnings of $4.50 to $4.55 per share, ahead of the analysts' target of $4.52. It forecast 2008 earnings of $5.30 to $5.50, against Wall Street's expectations of $5.20.The forecast puts Humana on a pace to boost annual earnings per share by more than 2.5 times from 2005 through 2008.The stock has climbed 40 percent this year, outpacing a 11.5 percent rise for the Morgan Stanley Healthcare Payor index <.HMO>, a broad gauge of health-insurer stocks.
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