Humana Posts 2Q Earnings Beat

The company gave guidance for the third quarter and the full year: it expects EPS to be approximately $2.15 for the third quarter and $7.75 for the full year. There are consensus estimates of $2.18 in EPS for the third quarter and $7.77 in EPS for the full year.

Earlier in July, Humana announced that it entered into a definitive agreement with Aetna Inc. (NYSE: AET) where Aetna will acquire all outstanding shares of Humana for a combination of cash and stock. Under the terms of the agreement, Humana stockholders will receive $125 in cash and 0.8375 of an Aetna common share for each Humana share. The transaction is subject to approval by both Humana and Aetna shareholders, as well as expiration of the Hart-Scott-Rodino antitrust waiting period and approvals of certain state Departments of Insurance and other regulators. The transaction is expected to close in the second half of 2016.

Bruce D. Broussard, President and CEO of Humana, said:

Our major franchise, Medicare Advantage, is stabilizing and our clinical programs continue to focus on the needs of our members living with chronic conditions. Furthermore, as we gain additional experience with our individual commercial business, we are strengthening our understanding of the actions necessary to ensure we can offer individuals a sustainable product.

At the end of this quarter, the company had cash, cash equivalents, and investment securities of $11.13 billion, down $388 million from $11.52 billion sequentially, primarily reflecting higher common stock repurchases.

Brian A. Kane, Humana’s Senior Vice President and CFO, added:

While certain operational challenges impacted our second quarter results, we are encouraged by recent progress and appreciate the diligence with which our leaders and associates have worked to overcome these issues. We remain confident that Humana’s strategic and financial prospects position us well for continued growth.

Shares of Humana closed Tuesday up 0.3% at $184.52 on a 52-week trading range of $115.51 to $219.79. The stock has a consensus analyst price target of $201.63.