Humana (HUM) Earnings Preview

Secondary Plays:
UNH, WCG, HS, CVH, WLP, CI, AET...

HUM is expected to report 4Q07 earnings Monday morning before the mkt open with a conf call to follow at 9:00AM ET... HUM Consensus: First Call 4Q07 EPS of $1.32, revs of $6.24 bln; 1Q08 EPS of $0.56, revs of $6.93 bln; FY07 EPS of $4.80, revs of $25.1 bln; FY08 EPS of $5.46, revs of $28.5 bln; Citi is expecting 211k Medical Advantage Enrollment growth...
Guidance: Co guided FY07 EPS of $4.75-4.80 (equates to $1.27-$1.32 for 4Q07); 130k Medicare Advantage net enrollment growth for '07; 4Q07 Medical Expense Ratio of 79% (3Q07 81.3%). Co guided for FY08, sees FY08 EPS of $5.30-5.50; Medicare Advantage net enrollment growth 200k-250k; Total Medicare medical costs 83-84% for FY08. There does not seem to be a pattern on EPS reporting; and rev growth is erratic...
Expectations: As HUM has got itself in better cash position and continues to be a cash generator, analysts are expecting an update of what the co plans to do with its cash. There is skepticism from analysts regarding the co's target of net Medicare Advantage membership growth for FY08 due to new competition. In addition, investors are a bit worried about the uptick in its Medical Expense Ratio due to higher than expected figures from WLP and UNH...
Areas of Focus on the Call:
1) Medicare Advantage Enrollment Color (Analysts are skeptical, inline guidance will be a positive)
2) Medical Cost Trends (Will be questions regarding if co saw same pressure as UNH & WLP)
3) Cash usage (HUM said that it is in better position than in the past 2 years in regards to its cash position; has more ability to do acquisitions or share repurchase)...