Humana: Hold Rating Amid Short-Term Pressures and Long-Term Optimism

Bank of America Securities analyst Kevin Fischbeck reiterated a Hold rating on Humana (HUM – Research Report) yesterday and set a price target of $342.00.

Kevin Fischbeck has given his Hold rating due to a combination of factors surrounding Humana’s stock. After discussions with Humana’s CEO and CFO during the BofA Healthcare Conference, Fischbeck noted that the company has a positive long-term outlook but is currently facing short-term pressures. The company’s cost trends are slightly favorable, and although the first quarter showed some positive aspects, Humana is not immune to industry-wide challenges. They have good visibility into risk coding and inpatient admissions, which started high but moderated, suggesting some stability moving forward. Additionally, there was a subtle positive development in the fourth quarter of 2023, providing a solid base for the company’s pricing strategy for the year 2024. However, visibility in the dental segment is slightly unclear due to provider disruptions.

Looking ahead, Humana is expected to face margin pressure due to the limitations imposed by total beneficiary cost (TBC) constraints, which may only allow the company to maintain stable margins. Significant margin improvements are likely to result from exiting plans rather than from benefit adjustments. Membership is anticipated to drop by approximately 5% in 2025 as the company exits non-profitable markets and plans. Although the company aims for core growth, it also plans to adopt a conservative approach due to the uncertainties about competitor responses. Growth is expected to align with the market in 2026, and Humana remains optimistic about achieving mid-single-digit industry growth in the future. These factors contribute to Fischbeck’s neutral stance, reflected in his Hold rating and the close alignment of the price objective with the current market price.

In another report released on April 29, Truist Financial also maintained a Hold rating on the stock with a $355.00 price target.

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Humana (HUM) Company Description:

Humana Inc. is a leading health insurance service provider in the United States. The company, through its Retail division, provides medicare benefits and state-based medicaid contracts, which are marketed on a retail basis to individuals. The Group and Specialty business offers employer group commercial fully-insured medical products and specialty health insurance benefits. Humana offers pharmacy solutions, provider services, home-based services, and clinical programs to the company’s health plan members as well as to third parties through the Healthcare Services segment.