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Humana Boosts Full-year Earnings Guidance (HUM)

Humana Inc. (NYSE: HUM) reported better-than-expected fiscal first quarter earnings on Wednesday; however, the Company said it was bothered about 2014, when lower government rates for private Medicare insurance would come into effect.

Humana, which generates about 2/3 of its entire revenue from Medicare Advantage, could see its top line reel under pressure, just like any other private Medicare provider due lower rates propsed by the government.

A Private Medicare plan is one in which the government directly reimburses to the Company. Although the government upwardly revised rates last month, Humana said that new rates are still challenging. The Company said that making prediction on 2014 earnings growth was bit difficult, at this point of time.

Lately, several other healthcare providers such as WellPoint Inc. (NYSE: WLP), Aetna Inc. (NYSE: AET) and UnitedHealth Group Inc. (NYSE: UNH), which provide private Medicare, said that newest rates announced by the government on Medicare advantage will challenge them.

For the fiscal first quarter, Louisville, Kentucky-based Company reported a profit of $473 million or $2.95 a share compared to a profit of $248 million or $1.49 a share, in the same quarter of last year. The Company said earnings were boosted 26 cents a share due to onetime gain linked to claim settlements, which went in Company’s favor.

Stripping out onetime items, Humana reported earnings of $2.69 a share, comfortably beating analysts’ consensus estimate of $1.81 a share, according to a data compiled by Thomson Reuters.

Revenue rose 2.6% to $10.49 billion, driven by higher enrollments in individual and Medicare health plans.

Buoyed up by strong fiscal first quarter results, Humana upwardly revised its full-year earnings guidance.  The Company now expects earnings in the range of $8.40 to $8.60 a share up from its earlier forecast of $7.60 to $7.80. Analysts’ consensus estimate was for earnings of $7.99 a share.

For the current quarter, the healthcare provider anticipates earnings of $2.40 to $2.50 a share compare to analysts’ expectation of $2.31 a share.


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