If you’re looking for a stock that seems immune to the effects of the novel coronavirus — at least, one that’s been able to prosper even during the massive first-quarter selloff — then Humana (NYSE:HUM) stock may be the one for you.
The Kentucky-based healthcare company is absolutely rockin’ so far this year, with shares up more than 60% year-to-date, far outstripping its competitors.
Humana also scored a solid first quarter and, unlike some other companies in the space, issued guidance for the next quarter that gives investors confidence that profits are likely to increase.
Here’s a closer look at HUM stock.
Humana at a Glance
Humana’s first-quarter earnings were on April 29, when the company reported revenue of $18.93 billion and adjusted earnings per share of $5.40. That beat Wall Street estimates of $18.38 billion and EPS of $4.84. Net income fell from $746 million a year ago to $473 million, or $3.56 per share.
Retail segment revenues increased by more than $2.7 billion to $16.76 billion, Humana said, as it added more than 400,000 members. Humana has a total of 3.8 million members in its retail segment now. Revenues in the healthcare services group rose by nearly $1 billion. Overall, the company’s revenues were nearly $3 billion higher than the same quarter of 2019.
CEO Bruce Broussard told analysts after the earnings report that Humana is seeing increased demand in telehealth services, as people are more concerned for their health but unwilling or unable to leave their homes to make an office visit.
“Telehealth, together with increased use of our mail-order pharmacy and early fills allows our members with chronic conditions to continue to receive care to prevent long-term negative health implications. Since the declaration of the national emergency in mid-March, we have closed approximately 630,000 gaps in care. Further the providers in our value-based arrangements saw the benefit of predictable cash flow streams and we’re the fastest to innovate and create thoughtful digital telehealth strategies in response to the crisis.”
For the full year, Humana forecast EPS between $18.25 and $18.75, while Wall Street expects earnings of $18.44 per share.
The forecast is meaningful, particularly when you consider that Humana competitor Anthem (NYSE:ANTM) withdrew its 2020 guidance, saying it couldn’t predict what would happen in light of the coronavirus pandemic.
HUM Stock Is Soaring
Health insurers are having a great year so far in 2020 — if you can call anything great during a pandemic, that is. But when you compare HUM stock to its competition, you’ll see that there’s a clear winner.
Humana’s stock is up an astounding 64% year-to-date, easily topping its biggest foes. Anthem is having a fine year in its own right, with a 42% surge and UnitedHealth Group (NYSE:UNH) and Cigna (NYSE:CI) are both above 30%.
Part of the reason for Humana’s success is that Humana members are paying increased premiums for government-backed Medicare plans.
However, Humana has not yet seen the brunt of the coronavirus pandemic’s impact on its business. The widespread shutdown and national emergency only affected the last two weeks of the first quarter as brokers were no longer able to have face-to-face meetings with prospective clients.
Humana expects lower numbers for the second quarter in medical procedures that will affect its services segment, says CFO Brian Kane, although nonessential procedures are expected to resume later this year.
The Bottom Line for Humana
Humana drew on $1 billion in loans and issues another $1.1 billion in senior notes to give it flexibility to navigate these uncertain waters, giving it $2.4 billion in cash and $2 billion in available credit.
But aside from the increased debt burden, Humana appears well-prepared to function even should stay-at-home orders continue to affect its business into the second half of the year.
HUM stock is attractively priced with a forward price-to-earnings ratio of only 20. It is ranked as a strong buy with an ‘A’ rating in my Portfolio Grader right now.
Louis Navellier had an unconventional start, as a grad student who accidentally built a market-beating stock system — with returns rivaling even Warren Buffett. In his latest feat, Louis discovered the “Master Key” to profiting from the biggest tech revolution of this (or any) generation. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.