Shares of Humana Inc. (NYSE:HUM) soared nearly 20 percent Friday amid reports the health insurer is considering a sale of the company, the Wall Street Journal reported. Following the report, the stock leaped 19.5 percent to as high as $219.79 in afternoon trading.
The Louisville, Kentucky, company, which had a market value of $27 billion ahead of the report, specializes in Medicare health insurance and drug plans for the elderly and disabled. Humana operates in three segments: retail, its employer group unit and healthcare services.
Several companies have indicated an interest in taking over Humana, and the company is working with advisers at Goldman Sachs Group Inc., the Wall Street Journal reported Friday, citing people familiar with the matter. Competitors Aetna Inc. (NYSE:AET) and Cigna Corporation (NYSE:CI) are among bidders that have held preliminary discussions with the company, the sources said. Shares of Aetna and Cigna leaped 2 percent and 4 percent, respectively.
Brian Kane, chief financial officer at Humana, warned investors last month that hospital inpatient admissions were unexpectedly rising in March and April, which can weigh on insurer profits. "During the last weeks of the quarter and into April, we are seeing an elevated level of authorizations for hospital admissions, which, although still declining, are slightly higher than we had anticipated," Kane said during an earnings call with shareholders and analysts on April 29.
Humana announced in March it agreed to sell its Concentra Inc. unit, which provides occupational health, urgent care and physical therapy services, to a joint venture of Select Medical Holdings Corporation and private-equity firm Welsh Carson Anderson & Stowe for around $1.06 billion in cash.
Humana’s earnings missed Wall Street forecasts in April while revenue topped estimates, rising nearly 19 percent. For the January-March period, Humana posted first-quarter earnings of $430 million, or $2.82 a share, as revenue rose 18.7 percent to $13.8 billion, compared with a profit of $368 million, or $2.35 a share, on sales of $11.7 billion during the same period a year earlier.
Excluding a tax benefit from the sale of Concentra, earnings per share for the first quarter were $2.47 a share.
Shares of Humana have soared nearly 47 percent this year ahead of Friday’s close.