On Monday, Morgan Stanley initiated coverage on shares of Humana (NYSE: HUM), a major player in the Managed Care Organization sector, with an Equalweight rating. The firm has set a price target for Humana at $374.00. Humana is recognized for its focus on the Medicare Advantage (MA) program, catering primarily to individuals aged 65 and above. The company operates through its Insurance and CenterWell segments, which contribute 85% and 15% to its Operating Revenue, respectively, and 63% and 37% to its EBITDA.
Despite the favorable growth outlook for the Medicare Advantage sector, Humana is projected to face significant challenges in the near term. Analysts predict a 37% decline in Humana's earnings per share (EPS) for 2024, which complicates the forecast for subsequent growth. The company's recovery in the Medicare Advantage market is expected to yield a 24% increase in EPS for 2025, reaching $20.30, which is notably lower than the previous $37.00 target.
Looking further ahead, Humana's EPS is anticipated to grow by 25% in 2026. However, these projections indicate a compound annual growth rate (CAGR) of -1.0% for the period from 2023 to 2026. This figure falls significantly short of the company's long-term growth target, which was previously set between 11% and 15%.
In other recent news, healthcare insurer Humana Inc (NYSE:HUM). has announced significant developments. The company has appointed Jim Rechtin as its new President and Chief Executive Officer, effective July 1, 2024. Rechtin, with over two decades of healthcare experience, will succeed current CEO Bruce Broussard.
In financial news, RBC Capital Markets and Cantor Fitzgerald have revised their price targets for Humana. RBC Capital has set a new target at $353, while Cantor Fitzgerald adjusted its target to $360. Both firms made these adjustments in response to uncertainties about Humana's 2025 earnings per share (EPS) growth targets.
Humana has also reported a solid start to 2024, maintaining its full-year EPS guidance at approximately $16. The company has increased its individual Medicare Advantage membership growth forecast by 50,000, expecting a net growth of 150,000.
InvestingPro Insights
As we consider the outlook for Humana (NYSE: HUM) detailed by Morgan Stanley, InvestingPro data offers additional context for investors. Humana's market capitalization stands at a robust $42.84 billion, reflecting its significance in the Managed Care Organization sector. Moreover, the company's P/E ratio has adjusted to a more attractive 17.47 over the last twelve months as of Q1 2024, which may appeal to value-oriented investors. The revenue growth of 14.22% over the same period indicates a strong operational performance, despite the projected EPS challenges ahead.
Two InvestingPro Tips underscore Humana's financial health and shareholder value approach: the company holds more cash than debt on its balance sheet, and it has raised its dividend for 7 consecutive years. This could be particularly reassuring for investors looking for stable dividend-paying stocks in the healthcare industry. For those interested in a deeper dive, InvestingPro offers additional tips, including insights on Humana's share buyback strategy and its low revenue valuation multiple.
Investors may also take note of Humana's commitment to shareholder returns, as it has maintained dividend payments for 14 consecutive years. For those considering an investment, using the coupon code PRONEWS24 grants an additional 10% off a yearly or biyearly Pro and Pro+ subscription to InvestingPro, where 7 additional tips on Humana are available, providing a comprehensive view of the company's investment potential.
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