When Humana (NYSE:HUM) releases its third quarter earnings on Monday, November 5, 2012, analysts are expecting a 19.3% drop in earnings from a year ago. The consensus estimate is $2.05 per share, down from earnings of $2.54 per share a year ago.
In most situations, when earnings do not meet analyst estimates, a business' stock price will tend to drop. On the other hand, when actual earnings beat estimates by a significant amount, the share price will likely surge. SEE: Everything Investors Need To Know About Earnings
What to Expect: The consensus estimate is where it was three months after falling from $2.06 a month ago. Analysts are projecting earnings of $7.15 per share for the fiscal year.
Humana is expected to report revenue of $9.86 billion for the quarter, beating last year's figure of $9.3 billion by 6%. The anticipated revenue for the fiscal year is $39.34 billion.
Company Performance: In the past four quarters, revenue has shown consistent growth. It increased 4.5% to $9.7 billion in the second quarter. Prior to that, the figure rose 11.2% in the first quarter, 8.5% in the fourth quarter of the last fiscal year and 10.4% in the third quarter of the last fiscal year.
Compared to the industry average of 7.62, HUM's P/E ratio of 9.9 is quite high. This could mean that the market is expecting big things over the next few months or years. There are generally two price/earnings ratios calculated: the first, called the trailing Price/Earnings ratio, is calculated using the previous years actual earnings; the second, called forward Price/Earnings ratio, is calculated using the next year's estimated earnings. High P/E stocks could be "growth" stocks, while low PE stocks may be "value" stocks. SEE: Understanding The P/E Ratio
Over the past quarter, the stock price has risen to $74.47 from $62.88 on August 2, 2012. Humana's stock price is on a downward streak. The share price has fallen 88 cents since October 24, 2012.
The Competition: Humana is a managed health care company that offers health and supplemental benefit products. Most analysts (15 of 23) rate Humana a buy. Opinion about the stock has worsened recently, as buy ratings have dropped slightly over the last three months.
The company's closest competitor in the insurance (accident and health) industry is UnitedHealth (UNH). Analysts are less optimistic about Humana than about UnitedHealth. Fourteen out of 18 analysts rate the latter a buy.