Will Humana’s Stock Outperform?

With shares of Humana Inc. (NYSE:HUM) trading at around $78.14, is HUM an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

C = Catalyst for the Stock’s Movement

Q4 EPS came in at $1.19, which beat the average expectation of $1.06. However, EPS was a penny lower year-over-year. Q4 revenue came in a $9.56 billion, which missed the average expectation of $9.73 billion. However, it was higher than the $9.06 billion we saw for the same quarter last year. The retail business hurt profits mostly due to rising costs, but operating expenses and healthcare for employees were both down. Overall, Humana did a good job controlling higher costs. For FY2012, EPS came in at $7.47, beating expectations. FY2012 revenue was $39.13 billion, which was a 6 percent increase year-over-year.

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Humana offered solid guidance. EPS expectation for Q1 is between $1.75 and $1.85. This is above the original analyst consensus of $1.53. FY2013 EPS is expected to come in between $7.60 and $7.80. FY2013 revenue is expected to come in between $41.00 billion and $41.50 billion. Put simply, Humana is expecting solid growth in 2013.

Let’s take a look at some important numbers prior to forming an opinion on the stock…

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