But there also could be some winners in health care. Cliggott thinks generic drug maker Teva Pharmaceutical Industries (TEVA) could benefit from any assault on drug pricing. And the CEO of managed-care company Humana (HUM), Michael McAllister, has said that his company can benefit by bringing technology systems and other efficiencies to the insurance market. Medco Health Solutions (MHS) and Express Scripts (ESRX) also could benefit, as each offers pharmacy-benefits services.

PE of 6, and a PEG of 0.50.

Louisville’s healthcare provider announced that its board increased the company’s buyback program to $250 million. This amount excludes the $92.8 million used during the last repurchase authorization of $150 million, which was initiated in February 2008. The repurchases can be made at any time as long as they are before the expiration date of December 31, 2009.

After Humana’s second quarter results beat everyone’s estimates, the stock jumped 6% in Monday trading. The company earned $209.9 million, or $1.24 a share, a slight drop from the year-ago period when Humana earned $216.8 million, or $1.28 a share. Humana was expecting $1.15 to $1.20 a share while Wall St. was anticipating $1.18 a share.

Revenue for the quarter was $7.35 billion compared to last year’s $6.43 billion. The company added that the better-than-expected results were due to surprise results in its Medicare Prescription Drug Plan.

Humana increased its full year forecast to $4.30 to $4.40 a share from its previous expectation of $4.10 to $4.35 a share. Analysts are expecting $4.23 a share

Humana also recently agreed to purchase Cariten from Knoxville, Tenn.-based Covenant Health for about $245 million in cash. The deal will close in the fourth quarter of this year.

Oppenheimer research has an outperform rating on the stock and was bullish on the company’s surprising second-quarter and the Cariten purchase. The Cariten acquisition could add over $0.10 to EPS next year and 2% to Humana’s earnings growth rate in 2009. The 12-18 month target is set at $76, offering huge upside potential.

Louisville’s healthcare provider announced that its board increased the company’s buyback program to $250 million. This amount excludes the $92.8 million used during the last repurchase authorization of $150 million, which was initiated in February 2008. The repurchases can be made at any time as long as they are before the expiration date of December 31, 2009.

After Humana’s second quarter results beat everyone’s estimates, the stock jumped 6% in Monday trading. The company earned $209.9 million, or $1.24 a share, a slight drop from the year-ago period when Humana earned $216.8 million, or $1.28 a share. Humana was expecting $1.15 to $1.20 a share while Wall St. was anticipating $1.18 a share.

Revenue for the quarter was $7.35 billion compared to last year’s $6.43 billion. The company added that the better-than-expected results were due to surprise results in its Medicare Prescription Drug Plan.

Humana increased its full year forecast to $4.30 to $4.40 a share from its previous expectation of $4.10 to $4.35 a share. Analysts are expecting $4.23 a share

Humana also recently agreed to purchase Cariten from Knoxville, Tenn.-based Covenant Health for about $245 million in cash. The deal will close in the fourth quarter of this year.

Oppenheimer research has an outperform rating on the stock and was bullish on the company’s surprising second-quarter and the Cariten purchase. The Cariten acquisition could add over $0.10 to EPS next year and 2% to Humana’s earnings growth rate in 2009. The 12-18 month target is set at $76, offering huge upside potential.

Buy - Price 44.98 on March 18
by Hilliard Lyons

Upgrading Humana to Buy, from Neutral, following the recent decline in the stock price. Over two days, HUM shares fell when a competitor lowered earnings expectations, followed by reduced guidance from HUM. The shares rebounded, but we feel the price is still attractive and reflects risk of further estimate changes and large exposure to government programs. Humana lowered earnings expectations for '08 based on higher costs in its standalone Medicare prescription-drug program. [Humana seems] to be experiencing some growing pains with this product...EPS for 2008 could be $4.15, versus our earlier estimate of $5.40....With elections in November...more hostile rhetoric toward the private sector could cause volatility in managed-care stocks [later in '08]....Humana has traded at price/earnings multiples in upper teens when superior growth was reported, and single-digit P/Es when prospects were not as optimistic...about 13 times would be appropriate and consistent with a long-term average for HUM. Applying this to our '08 EPS estimate results in our target, 55. Market-cap: $7.6 billion.

I bought Cigna (CI), Humana (HUM) and Coventry (CVH) on Wednesday, Jenner says. I think all have the potential to be up at least 25% over the next 12 months.

Oversold

Will overcome recent beating

Humana (HUM) was upgraded at UBS. Rating raised to Neutral from Sell. 2008 EPS estimates lowered to $4.06 from $5.55 and Price Target lowered to $46 from $62.

Humana (HUM) recently announced a share buyback of up to $150 million.

Judging by recent operating results, management's bullishness appears to be justified. Humana's fourth-quarter 2007 profits jumped 57% to $243 million, boosted by a one-time gains and a lower tax rate. EPS came in at $1.43, $0.11 ahead of the Wall Street forecasts. Also, the Louisville, KY-based health insurer's profit growth was far more impressive than peers Wellpoint (WLP) and UnitedHealth (UNH), which boosted year-over-year EPS 7% and 3%, respectively.

On the heels of strong results, Humana raised its earnings guidance for 2008 to between $5.35 and $5.55, leading the consensus forecast to rise $0.07 to $5.50. Humana earned $4.91 a share in 2007.

While Medicare Advantage (MA) membership rose by 14%, the quarterly benefits ratio (benefit expenses as a percent of premium revenue) came down by 290 basis points to 80.3%. Humana ended the fourth quarter with 1.14 million patients enrolled in its MA plans. That metric rose to 1.24 million at the end of January, and Humana aims to add between 200,000 and 250,000 additional members in 2008.

Of course, recent cuts in funding for government-sponsored programs like Medicare and Medicaid could pressure Humana's top and bottom lines.

To offset potential regulatory limits in the government-sponsored programs, Humana is using its considerable financial strength to augment the core business through acquisitions. Humana bought KMG America and CompBenefits in 2007.

KMG America's voluntary products complement Humana's offerings, while CompBenefits offers a full-service vision product and has more than 25 years of experience in dental plans.

Goldman Sachs' Bosch added in his note to clients that there is a "building realization that the MA program is likely to be a long-term vehicle for Medicare cost-containment, even under a potentially Democratic White House and Congress post the elections." Analyst Dave Shove of BMO Capital Markets said that health insurers are poised to benefit from stable cost trends and a lack of threats to reimbursement rates in 2008.

Shares of most major managed-care companies have dipped on concerns surrounding New York Attorney General Andrew Cuomo's plans to sue commercial insurers. Humana does not have a great deal of exposure to Medicare, and is unlikely to be heavily affected by the lawsuits.

Shares of Humana now trade below $65, well below the $88.10 52-week high. The company has been generating attractive earnings growth, has a return on equity of 23.54% and a decent amount of cash on its balance sheet. I expect the shares to yield positive returns over the next few years.

Weak economy is killing this one.