Humana (HUM) Taps Debt Market with Senior Note Pricing

Humana inc.. HUM has announced the pricing for its public offering of $750 million senior secured notes. The Notes bear interest at 3.700% and are due to mature in 2029. The Offer is subject to certain closing conditions.

Ticket sales should be consummated on March 23, 2022.

In the headlines

The health insurer expects to generate proceeds of $741.1 million from this transaction after subtracting policyholder rebates and estimated offering costs. The health insurance giant plans to use the funds for general purposes, such as paying off current debt, including borrowing under its commercial paper program.

HUM is also trying to reduce its interest burden, thereby facilitating margin expansion.

Humana benefits from a stable financial situation. HUM ended the year with cash, cash equivalents and investment securities of $16.586 billion, greater than its long-term debt of $10.541 billion. Its $3.39 billion cash balance can easily handle the $1.9 billion short-term debt. HUM’s long-term debt to capital ratio is more or less equal to the industry average, indicating that it runs its operations with the same amount of debt as its industry peers.

HUM’s operational strength should enable it to service debt without interruption, maintaining the solvency of the stock. Cash flow from operations is expected to be between $3 billion and $3.5 billion in 2022, implying growth from the $2.3 billion reported in 2021.

Building on a strong financial position, Humana has been effectively deploying its excess capital for several years.

Last month, HUM’s board of directors approved a 12.5% ​​increase in its quarterly dividend to return more value to its shareholders. With the announcement, the payout now stands at 78.75 cents per share from the previous payout of 70 cents. This is the sixth consecutive year of a dividend increase. The larger dividend will be paid on April 29, 2022 to Humana shareholders of record as of March 31.

In January, Humana reached an agreement with Mizuho Markets Americas LLC and Wells Fargo Bank, National Association to repurchase $1 billion worth of stock under its $3 billion share buyback program. This buyout plan was announced by HUM’s Board of Directors in February 2021 with an expiry date of February 18, 2024.

Zacks Ranking and Price Performance

With a market capitalization of $55.37 billion, shares of this currently ranked No. 3 (Hold) Zacks player have gained 8.1% in one year, underperforming its industry growth by 33.2%. . You can see the full list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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However, its acquisitions and divestitures, efficient deployment of capital, and strong Medicaid business will help it rebound in the future.
Actions to Consider

Some top ranked actions in the medical field are Mednax, Inc. MD, The Ensign Group, Inc. ENSG and McKesson Corporation MCK. While Mednax sports a Zacks rank #1 (strong buy), Ensign Group and McKesson currently carry a Zacks rank #2 (buy).

Mednax earnings have exceeded estimates in each of the past four quarters, averaging 27.99%. Zacks’ consensus estimate for MD earnings in 2022 suggests a 12.9% improvement, while the same for revenue suggests 4.2% growth from the respective figures released a year ago. . MD’s year-to-date earnings consensus mark has moved north 7% in the past 30 days.

Ensign Group’s net income has exceeded estimates in each of the past four quarters, averaging 1.72%. The Zacks consensus estimate for ENSG earnings in 2022 suggests an 11.8% improvement, while the same for revenue suggests 12.1% growth from the respective figures released a year ago. a year. The consensus mark for 2022 earnings has moved 3.6% north in the past 60 days. The ENSG has a VGM score of A.

McKesson Corporation, based in California, is a healthcare services and information technology company. MCK has a VGM score of A and a trailing four-quarter earnings surprise of 20.64%, on average. Zacks’ consensus estimate for MCK’s revenue in 2022 shows a 38.9% increase from the figure reported a year ago. The consensus brand has moved north 5.7% in the past 60 days for current year earnings.

Shares of Mednax and Ensign Group have lost 13% and 1.1% respectively in one year, while shares of McKesson have gained 59.2%.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Tana T. Thorsen