Humana Tops Q3 Earnings Estimates

Humana (HUM 36.81, -0.77) reported third quarter earnings Monday morning and issued mixed guidance for fiscal year 2009 and fiscal year 2010.

The company reported third quarter earnings of $1.78 per share, which was $0.01 better than the First Call consensus of $1.77. Revenue rose 8.0% year-over-year to $7.72 billion, slightly below the $7.82 billion consensus.

Humana said total premium and administrative services fees were up 7% compared to the prior year's quarter. The increase in premiums and administrative services fees primarily reflects an increase in both average Medicare Advantage membership and per-member premiums for these products.

For fiscal year 2009, the company sees earnings of approximately $6.15 per share vs. the $6.14 consensus estimate, while revenues are expected to be approximately $31 billion, compared to the $31.24 billion consensus.

The company also provided guidance for fiscal year 2010, which calls for earnings per share of $5.05 to $5.25 vs. the consensus of $5.37, while revenues are expected to be $32 billion to $34 billion vs. the $29.63 billion.

The company said, "Looking to 2010, we're forecasting substantial net-new Medicare Advantage member growth, attributable to both large-group and individual customers. In addition, as we've said in the past, we target an overall Medicare pretax operating margin of approximately 5%, which next year will include a significant increase in group membership, a traditionally lower margin business, a moderating margin for our stand-alone PDPs, and an individual Medicare margin that approximates the overall target. We also anticipate stabilizing our Commercial operating results with administrative cost reductions and continuation of pricing actions."