On Tuesday, Piper Sandler confirmed its Neutral rating and $270.00 stock price target for healthcare company Humana (NYSE: HUM), which has seen its shares decline nearly 9% in the past week. The firm's stance is based on a scenario analysis focused on Humana's potential earnings risk related to members who have coverage through both the Veterans Affairs (VA) and Medicare Advantage (MA) programs.
According to InvestingPro data, Humana maintains a strong market position with a $30.17 billion market capitalization and has demonstrated solid revenue growth of 12.37% over the last twelve months.
The analysis by Piper Sandler was prompted by a Wall Street Journal article from December 2, 2024, which highlighted that insurers have received substantial payments from Medicare for veterans who incur minimal costs to the companies.
By integrating the data from this article with their own review of enrollment patterns and plan benefits, Piper Sandler aimed to estimate the possible earnings impact from this group of members on Humana. InvestingPro analysis shows that despite current challenges, Humana maintains a healthy financial position with a "GOOD" overall financial health score and has consistently maintained dividend payments for 14 consecutive years.
Humana's Honor plans, which are specifically tailored to attract veterans, are recognized as a strategic move by the company. However, Piper Sandler suggests that the potential earnings from these plans could pose a financial risk in the upcoming year. The firm points out that the new administration has made commitments to cut healthcare spending and eliminate waste, which could affect Humana's revenue from these plans.
In their statement, the analyst from Piper Sandler remarked on the delicate balance Humana faces with its Honor plans. They acknowledged the company's intent to serve veterans but also cautioned about the financial implications in light of the government's pledge to tighten healthcare budgets.
Piper Sandler's reiterated Neutral rating and price target of $270.00 for Humana shares reflects a careful evaluation of the company's position within the context of the broader healthcare policy landscape and its potential effects on earnings.
InvestingPro's Fair Value analysis suggests that Humana is currently undervalued, with additional insights and detailed financial analysis available in the comprehensive Pro Research Report, one of 1,400+ expert analyses available to subscribers.
In other recent news, UnitedHealth Group Inc (NYSE:UNH). has been under public scrutiny following the shooting death of executive Brian Thompson, which has amplified public discontent with the health insurance industry.
Despite no direct evidence linking the shooting to UnitedHealth's business practices, the incident has raised concerns about the potential for violence against insurance executives. In response to the incident, Centene (NYSE:CNC) Corp. moved its investor day online.
Humana Inc (NYSE:HUM). has announced significant changes in its executive team. Susan Diamond, the company's Chief Financial Officer, is set to step down in January 2025, transitioning into an advisory role through the end of that year.
She will be succeeded by Celeste Mellet, who currently holds the CFO role at Global Infrastructure Partners. Despite these changes, Deutsche Bank (ETR:DBKGn) analyst has maintained a "Hold" rating on Humana shares with a steady price target of $248.00.
BofA Securities has upgraded Humana's stock from Underperform to Neutral and increased the price target to $308, reflecting a more balanced risk-reward scenario following recent election results. In a recent earnings call, Humana reported surpassing its quarterly expectations and projected a minimum of $16 in earnings per share for the full year.
These are the latest developments in the healthcare sector that investors should keep an eye on.
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