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Humana (HUM) Hits 52-Week High, Is Further Upside Left?


Shares of Humana Inc. HUM scaled a 52-week high of $309.51 in Jul 6’s trading session before closing a tad lower at $309.02. This uptrend was supported by the company’s recent joint acquisition of Kindred Healthcare.

Year to date, the stock has rallied nearly 25%, outperforming its industry’s growth of 12.1%. Now let’s dig deeper to analyze the reasons behind the company’s stock appreciation.

Acquisition of Kindred Healthcare: The company recently announced that it has completed its acquisition of Kindred Healthcare, jointly with TPG Capital and Welsh, Carson, Anderson & Stowe. With this agreement, Kindred Healthcare will be operated and owned by TPG and WCAS while Kindred at Home will be run as a standalone company by Humana, owning 40 % stake in it. Humana will enjoy a better geographic coverage with nearly 65% overlapping via its individual Medicare Advantage Membership. The transaction would provide the company with a better geographic and clinical scale in a capital efficient manner and also reduce its upfront capital outlay. Additionally, this would eradicate its exposure to non-core assets.

Rating Action: Recently, A.M. Best affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Ratings of “a-” for most of Humana’s insurance subsidiaries. The agency has also affirmed the Long-Term ICR of “bbb-” and the current Long- and Short-Term Issue Credit Ratings of Humana. The outlook of these ratings remains stable. The credit rating giant has further affirmed the FSR of A- (Excellent) and the Long-Term ICR of “a-” for the dental insurance subsidiaries of Humana. The outlook of these ratings stays stable.

Further Upside Left?

This Zacks Rank #2 (Buy) has an impressive Value Score of A. The stock possesses great growth potential, also apparent from its favorable Growth Score of A. Our research shows that stocks with a Value Style Score of A or B when combined with a bullish Zacks Rank #1 or 2 offer the best opportunities in the value investing space.

Its long-term earnings growth rate stands at 13.8% better than the industry’s growth rate of 13.4%.

Other Key Picks

Investors looking for other stocks worth considering from the same industry might also check out Molina Healthcare, Inc MOH, WellCare Health Plans, Inc. WCG and Triple-S Management Corporation GTS.

Molina provides Medicaid-related solutions to meet the health care needs of low-income families and individuals as well as to assist state agencies in their administration of the Medicaid program across the United States. Sporting a Zacks Rank #1 (Strong Buy), the stock delivered an average beat of nearly skyrocketing 112.3% in three of the last four quarters. You can see the complete list of today’s Zacks #1 Rank tocks here.

WellCare provides managed care services for government-sponsored health care programs. It carries a Zacks Rank of 2 and pulled off an average four-quarter positive surprise of 51.7%.

Triple-S provides a portfolio of managed care and related products in the commercial, Medicare and Medicaid markets in Puerto Rico, the United States. The company is a Zacks #2 Ranked stock and came up with an impressive positive earnings surprise of a whopping 260.6% over the last four quarters.

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