Humana Beats and Raises; Medicare Payments May Be Problematic

Health benefits provider Humana Inc. beat consensus estimates handily in its recently-ended quarter, the company announced Monday before the open, while projecting full-year earnings well ahead of analyst predictions. Q2 net income more than doubled to $217 million, good for EPS of $1.28, versus EPS of just $0.53 a year earlier. Revenue climbed 19% to $6.43 billion. Consensus analysts estimates were for EPS of $1.17. Humana credited efficiency gains in administration and increased payments from and enrollment in Medicare Advantage, from which Humana will derive more than 50% of its revenue in 2007. Medicare will pay Humana $76 billion in 2007, causing California Democrat Pete Stark to accuse the company of making "huge profits at taxpayers' expense." According to UBS' Justin Lake, "It is likely inevitable Congress will be forced to act, given the competing priorities and long-term solvency issues facing Medicare," something which could have negative implications on Humana's long-term outlook. Still, Humana is expecting full year EPS in a range of $4.40-$4.50; analysts had been calling for $4.34 a share.

Sources: Press Release, Bloomberg, Reuters, AP, MarketWatch
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Stocks/ETFs to watch: HUM. Competitors: UNH, AET, CI, CVH, WLP. ETFs: IHF

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