The stock price of Humana surged driven by the report that the health insurance and Medicare plans provider is considering to sell itself. Human’s stock went up as much as $219.79 per share, up by more than 20% earlier today.
Humana lost some of its gains, but still up by over 17% to $210.51 per share at the time of this writing, around 2:43 in the afternoon in New York.
Humana received takeover interests
According to the Wall Street Journal, Humana received takeover interests from potential buyers. People familiar with the matter told the newspaper that Humana engaged in preliminary discussions with Aetna and Cigna.
The report also indicated that Humana engaged the services of Goldman Sachs to help explore a potential sale. Humana’s current market capitalization is approximately $32 billion, up from around $27 billion last Friday.
Last year, Humana hired Goldman Sachs to explore and provide advice on the potential sale of Concentra, its urgent care unit. The company agreed to sell Concentra for approximately $1.1 billion to a joint venture of Select Medical Holdings and Welsh Carson Anderson Stowe last March.
Analysts have been considering Humana as one of the five health insurance providers that are ripe for consolidating the industry. The other companies are Aetna, Anthem, Cigna, and UnitedHealth Group.
Financial performance
Humana generates a majority of its revenue from patients under Medicare, the federal health insurance program for elderly Americans. Private insurers often administer the Medicare. The Affordable Care Act also helped boost Humana’s sales.
Last year, Humana posted $34 billion in revenue. During the first quarter of 2015, Humana reported earnings of $2.82 per share (including $0.35 per share tax benefit related to the pending sale of Concentra). The company ended the quarter with 14.2 million customers.
Humana expected to generate adjusted earnings in the range of $8.50 to $9.00 per share for fiscal 2015, a growth of 17% from its 2014 adjusted EPS. The company also estimated that its individual Medical Advantage membership will increase 13% to as much as 350,000 this year. Its stand-alone PDP membership is expected to increase 12% to as much as 500,000.
Humana gained more than 72% of stock value over the past year.
