Humana Inc. (NYSE:HUM) just released its quarterly report and things are looking bullish. The company beat both earnings and revenue forecasts, with revenue of US$20b, some 8.0% above estimates, and statutory earnings per share (EPS) coming in at US$10.05, 22% ahead of expectations. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. With this in mind, we've gathered the latest statutory forecasts to see what the analysts are expecting for next year.
Taking into account the latest results, the current consensus from Humana's 19 analysts is for revenues of US$82.2b in 2021, which would reflect a meaningful 11% increase on its sales over the past 12 months. Statutory earnings per share are forecast to nosedive 32% to US$21.30 in the same period. In the lead-up to this report, the analysts had been modelling revenues of US$81.9b and earnings per share (EPS) of US$21.48 in 2021. So it's pretty clear that, although the analysts have updated their estimates, there's been no major change in expectations for the business following the latest results.
It will come as no surprise then, to learn that the consensus price target is largely unchanged at US$462. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. The most optimistic Humana analyst has a price target of US$540 per share, while the most pessimistic values it at US$395. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Humana's past performance and to peers in the same industry. The analysts are definitely expecting Humana's growth to accelerate, with the forecast 11% growth ranking favourably alongside historical growth of 5.8% per annum over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 6.8% per year. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect Humana to grow faster than the wider industry.
The Bottom Line
The most obvious conclusion is that there's been no major change in the business' prospects in recent times, with the analysts holding their earnings forecasts steady, in line with previous estimates. Fortunately, they also reconfirmed their revenue numbers, suggesting sales are tracking in line with expectations - and our data suggests that revenues are expected to grow faster than the wider industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
With that in mind, we wouldn't be too quick to come to a conclusion on Humana. Long-term earnings power is much more important than next year's profits. We have forecasts for Humana going out to 2024, and you can see them free on our platform here.
You should always think about risks though. Case in point, we've spotted 1 warning sign for Humana you should be aware of.
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