Humana Inc. (NYSE:HUM) is scheduled to report its Q1 2010 results after the market closes on April 25, 2010. Managed care companies are expected to report solid earnings this quarter as the industry will work to leverage the improving fundamental backdrop with operating cost and investment restructuring to position for reform implementation in 2011. Q1 2010 operating EPS should reach as much as $1.22, which marks a decline of 9% YoY and the management suggest an EPS between the range of $1.10 to $1.20. For all whole year, an estimated $5.53 should be achievable. Stabilization in the commercial MLR from Q1 2009 to Q1 2010 is expected at 74.7%, which marks the lowest during this quarter and likely to increase through the year. The government segment MLR is expected to stand at nearly 87% against 86.8% in the same period a year ago, reflecting margin pressures in the Medicare Advantage segment. Cost efficiencies are expected to be realized in Q1 2010 and the company's SG & A ratio to decline 50 bps YoY to 13.5%. Humana, Inc. is a health services company that facilitates the delivery of health care services through networks of providers to its medical members. The company''s products are marketed primarily through health maintenance organizations and preferred provider organizations that encourage or require the use of contracted providers. The company also offers various specialty products to employers, including dental, group life and workers'' compensation, and administrative services to those who self-insure their employee health plans.
As for Q4 2009, Humana's operating earnings came in at $348.4 million, down from $420.7 million in the last quarter and up from $221.6 million in the same quarter a year ago. Revenues were up 1.8%, with commercials down by nearly 3%. Commercial premiums came in at $1.780 billion, flat sequentially (up 0.5%), and declined about 3% YoY. Government premiums rolled in at $5.589 million (of which TRICARE comprises $835 million or 15%), up 3.1% YoY and down 1.5% sequentially, with growth primarily driven by Medicare Advantage. Medical enrollment came in at 8.355 million, which remained flat sequentially and MA declined by 6k to 1.509 million in the government book. Medicaid enrollment increased 2k sequentially and TRICARE was up 19k from last quarter. Consolidated MCR was down 30 bpd sequentially and 150 bpd YoY. Consolidated SG & A ratio stood at 14.7%, up 100 bps sequentially. Cash flow came in at $274.1 million, down from $940.1 million in the previous quarter. Cash flow for the full year stood at $1,421.6 million, compared to $982.3 million in 2008.
Analysts' estimates for Q1 2010 range from a low of $1.07 to a high of $1.26, compared to a consensus estimate of $1.15, with number of estimates being 16 and the co-efficient variance 3.91. Humana is dealing with a challenging MA environment given the quirky nature of the 2010 rates/bids coupled with the work in managing down the PFFS exposure ahead of the 2011 season. HUM to likely remain conservative with its cash given the uncertainty facing MA reimbursement and commercial market reform. The key issue this quarter will be near-term and long-term outlook for the MA segment, particularly in light of the company's progress with its "15% solution." Given all the moving parts around MA in 2010, the margin on this segment remains a primary swing factor to the forecast. Every 50 bps swing in the Medicare MLR is worth ~$0.40 per share.
The stock closed at $ 44, down 0.01% on April 14, 2010 and most analysts' recommend a strong hold with a price target of $52.50. Analysts' would turn more positive on the stock if more clarity on MA Bidding and Reform is gained.
