CHICAGO, Aug. 2, 2011 /PRNewswire/ -- Zacks Equity Research highlights Dillard's, Inc. (NYSE: DDS) as the Bull of the Day and Montpelier Re Holdings (NYSE: MRH) as the Bear of the Day. In addition, Zacks Equity Research provides analysis Humana Inc. (NYSE: HUM), Unitedhealth Group Inc. (NYSE: UNH) and CIGNA Corporation (NYSE: CI).
Full analysis of all these stocks is available at http://at.zacks.com/?id=2678.
Here is a synopsis of all five stocks:
Dillard's, Inc. (NYSE: DDS) first-quarter 2011 earnings of $1.27 per share beat the Zacks Consensus Estimate of $0.91 and surged approximately 84% from the prior-year quarter on the heels of strong comparable store sales growth coupled with efficient inventory management. Management is also undertaking restructuring initiatives and inventory reduction efforts to save costs and boost profitability.
Moreover, in order to enhance its liquidity position and manage risks more efficiently, Dillard's has recently formed a wholly-owned real estate investment trust company and a captive insurance company. Further, Dillard's healthy cash flow and balance sheet allow it to make shareholder-friendly moves, such as acquisitions, dividends and share repurchases.
Currently, we are maintaining our long-term Outperform recommendation on the stock. Our target price of $64.00, 16.8X 2011 EPS, reflects this view.
Montpelier Re Holdings (NYSE: MRH) reported second quarter operating earnings much lower than the Zacks Consensus Estimate. The quarter suffered largely due to catastrophe losses resulting from tornado activity in the United States in April and May, lower investment income and higher operating expenses.
The current pricing environment in the primary insurance market and the stressed economy are expected to restrict top-line growth. Additionally, there exists execution risk with the newer platforms, and we expect investment yields to remain under pressure in the near term.
Our six-month target price is $16.00. This price target along with the annual dividend of $0.40 implies an expected total return of negative 6.1% over that period. This is consistent with our Underperform rating.
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Humana Beats Estimates
Humana Inc.'s (NYSE: HUM) second-quarter operating earnings came in at $671.4 million or $2.50 per share, surpassing the Zacks Consensus Estimate of $2.07 per share. The figure also compares favorably with earnings of $566.4 million or $2.11 in the year-ago quarter.
The operating earnings exclude the positive impact of 21 cents per share in the second quarter of 2011 and 44 cents per share in the prior-year quarter as a result of favorable development of prior-period medical claims reserves. The prior-period earnings also exclude the negative impact of 55 cents per share related to the write-down of certain deferred acquisition costs.
The better-than-expected showing was attributable to higher year-over-year earnings in the Humana's Retail and Health and Well-Being Services business segments, which was partially offset by lower earnings in the company's Employer Group business segment.
On a reported basis, Humana earned $726.5 million or $2.71 per share pre-tax in the reported quarter as opposed to $535.9 million or $2.00 per share in the prior-year quarter.
Consolidated revenues for the reported quarter climbed 8.0% year over year to $9.28 billion but failed to beat the Zacks Consensus Estimate of $9.32 billion. Revenues from premium and administrative services fees also increased 8.0% year-over-year.
Meanwhile, total medical membership increased 6.6% year over year to 11,002,800 at the end of June 30, 2011, while the total specialty membership at the end of the reported quarter hiked by 1.4% to 7,350,100.
Humana reported benefit expenses of $7.27 billion, an increase of 5.8% year over year, while the operating costs also climbed by 9.0% year over year to $1.19 billion. Depreciation and amortization expenses surged 5.3% year over year to $67.8 million.
Consolidated benefit ratio, which reflects the percentage of benefit expenses in premium revenues, fell by 60 basis points to 82.8% from 83.4% in the prior-year quarter. The consolidated operating cost ratio, which reflects the percentage of operating costs in total revenues less investment income, climbed to 13.0% from 11.1% in the prior-year quarter.
Outlook for 2011
Humana hiked its earnings forecast to a range of $7.50 to $7.60 per share from $6.70 to $6.90 per share, while revenue outlook was increased to $36.5 billion to $37.0 billion.
The increase reflects lower projected benefit expense ratios in the company's Retail and Employer Group Segments and higher projected earnings for the Medicare business, along with higher projections for marketing reinvestments and expenses.
Unitedhealth Group Inc. (NYSE: UNH), a rival of Humana generated second quarter operating earnings of $1.16 per share, beating the Zacks Consensus Estimate of 93 cents. Another peer, CIGNA Corporation (NYSE: CI), is expected to declare its second quarter 2011 results before the market opens on August 4, 2011.
Humana carries a Zacks #2 Rank, implying a short-term Buy rating.
Get the full analysis of all these stocks by going to http://at.zacks.com/?id=2649.
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