The Zacks Analyst Blog Highlights: Humana, WellPoint, Navigant Consulting, FTI Consulting and CRA International

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May 03, 2011, 09:59 ET

CHICAGO, May 3, 2011 /PRNewswire/ -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Humana Inc. (NYSE: HUM), WellPoint Inc. (NYSE: WLP), Navigant Consulting Inc. (NYSE: NCI), FTI Consulting Inc (NYSE: FCN) and CRA International Inc. (Nasdaq: CRAI).

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Here are highlights from Monday's Analyst Blog:

Humana Beats Estimates

Humana Inc. (NYSE: HUM) reported its first-quarter operating earnings of $1.55 per share, surpassing the Zacks Consensus Estimate of $1.45 per share. This also compares favorably with earnings of $1.15 in the year-ago quarter.

The operating earnings exclude the positive impact of 31 cents per share in the first quarter of 2011 and 37 cents per share in the prior year quarter, as a result of favorable development of prior-period medical claims reserves.

The better-than-expected showing was attributable to higher year-over-year earnings in the Humana's Employer Group and Health and Well-Being Services business segments, partially offset by lower earnings in the company's Retail business segment.

On a reported basis, Humana earned $1.86 per share in the first quarter of 2011 as opposed to $1.52 per share in the prior-year quarter.

Behind the Headlines

Consolidated revenues for the reported quarter climbed 10.0% year-over-year to $9.19 billion, beating the Zacks Consensus Estimate of $9.05 billion.

Revenues from premium and administrative services fees also increased 10.0% year-over-year on the back of an 11% growth in average membership in the company's Medicare Advantage plans coupled with the acquisition of Concentra in December 2010. This was partially offset by lower average commercial group medical membership in the quarter.

Total medical membership increased 4.3% year-over-year to 10,921,900 at the end of March 31, 2011, while the total specialty membership at the end of March 31 hiked by 0.6% to 7,227,300.

Humana reported benefit expenses of $7.34 billion, an increase of 7.7% y/y, while the operating costs also climbed by 18.4% y/y to $1.26 billion. Depreciation and amortization expenses surged 12.3% y/y to $66.1 million in the reported quarter.

Consolidated benefit ratio, which reflects the percentage of benefit expenses in premium revenues, jumped 300 basis points to 83.8% from the prior-year quarter of 83.5%. The consolidated operating cost ratio, which reflects the percentage of operating costs in total revenues less investment income, climbed to 13.8% in the first quarter from 12.8% in the prior-year quarter.

Consolidated pretax income surged 19.2% year over year to $496.8 million in the quarter.

Segment Results

On April 26, Humana realigned its business units using the main segments of retail, employer group, health and well-being services, and other businesses to better reflect its business model.

Outlook for Fiscal 2011

Humana has reiterated its guidance provided on April 26, 2011, and has hiked its fiscal 2011 earnings forecast to a range of $6.70 to $6.90 per share from $5.95 to $6.15 per share. The new forecast represents a growth of about 4%-7% from 2010 earnings of $6.47 per share, against its previous expectation of a decline in 2011.

The increase also reflects favorable prior-period claims development in the first quarter of 2011, lower projected benefit expense ratios in the company's Retail and Employer Group Segments and higher projected earnings for the company's Health and Well-Being Services Segment.

According to Humana, the primary reason for raising the share repurchase authorization, cash dividend and the EPS outlook is the new rule of the health care reform that essentially requires Humana to pay out a minimum percentage of premiums on medical claims or issue rebates to consumers.

With the dividend announcement, Humana became the fourth largest health insurer to announce a larger dividend payment in the past year. WellPoint Inc. (NYSE: WLP) also paid a quarterly cash dividend of 25 cents per share in the first quarter of 2011, reported on April 27.

The quantitative Zacks #3 Rank (short term Hold rating) on the stock indicates no directional pressure on the shares over the near term.

Navigant Tops EPS, Rev Misses

Navigant Consulting Inc. (NYSE: NCI) reported first quarter 2011 adjusted earnings per share of 19 cents, outpacing the Zacks Consensus Estimate of 16 cents. The better-than-expected results were driven by increased demand for business consulting services.

Adjusted earnings per share also beat the last quarter and year-earlier quarter earnings of 14 cents and 15 cents, respectively. Adjusted earnings exclude the impact of severance expense and non-recurring tax benefit.

GAAP net income was $8.8 million or 17 cents per share compared with $0.6 million or 1 cents in fourth quarter 2010 and $6.4 million or 13 cents per share in the year-ago quarter.

Navigant's total revenue climbed 8.8% year over year and 3.2% sequentially to $188.8 million. Quarterly revenues, however, fell short of the Zacks Consensus Estimate of $179.0 million.

Revenues before reimbursements jumped 10.2% year over year and 4.9% sequentially to $169.6 million. Moreover, consultant utilization rate improved 5.4% sequentially and 1.3% on a year-over-year basis to 78% during the quarter. Average bill rate rose 3.8% year over year and 2.6% sequentially to $274.

Outlook

The company reaffirmed its 2011 revenue guidance in the range of $715 million to $760 million and adjusted EPS in the band of 70 cents to 77 cents.

Our Take

Navigant's first quarter results were above expectations and with economic conditions improving resulting in higher demand and client growth; we expect estimates to move up in the coming days.

One of Navigant's primary competitors, FTI Consulting Inc (NYSE: FCN), is expected to release its first quarter earnings on May 4, 2011, while another competitor CRA International Inc. (Nasdaq: CRAI) reported first quarter 2011 pro forma earnings of 40 cents per share, above the Zacks Consensus Estimate of 21 cents on the back of active pipelines for both litigation and management consulting businesses.

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