Humana: Another Early Victim Of The Debt Deal

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Analysts had been bullish on healthcare stocks this year. But fears of Medicare cuts, and cuts to other federal health programs, from the debt deal, sparked a major sell-off yesterday.

Health insurer Humana Inc. fell 2.98% yesterday, despite posting a 35% rise in Q2 profits, crushing Wall Street’s estimates. The company’s profits were pushed by a jump in customers signing up for its Medicare plans and lower claims.

Here’s what analysts make of the stock:

  • Barclays analyst Joshua Raskin said on the back of strong results he was raising 2011 EPS estimate to $7.50 per share, from previous estimate of $6.80. In the absence of one-time items, there was no doubt on the strength of the results.
  • Deutsche Bank analysts believe Medicare concerns will weigh on the stock. The company’s growth and profits look to be strong but a difficult medicare reimbursement outlook is dragging the sector as a whole. 
  • David Windley at Jefferies is bullish on the stock. He says for the moment, the stock is going down, even if the underlying business is doing well.

Meanwhile, at a conference call, Humana Inc.’s CEO Michael B. McCallister said the company would spend on wellness initiatives, and sales and marketing for Medicare plans, (via MSNBC):

“I’m just signaling today that barring something unusual, we should have a good ’12 in Medicare, and that’s why we’re willing to spend the money we’re preparing to spend in the latter part of this year, to prepare for it.”

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