Deutsche Bank has reiterated its Hold rating on Humana Inc . (NYSE: NYSE:HUM) while maintaining the price target at $250.00.
The firm's position reflects concerns over the visibility of the company's near and medium-term earnings. Deutsche Bank's target price is based on 12.5 times its estimated earnings per share (EPS) for the year 2025.
The analyst noted that the target multiple is a representation of the current challenges in forecasting Humana's financial performance. The lack of clarity on factors that will influence future earnings is a key reason for the cautious stance.
It is anticipated that investors will seek more evidence of progress within Humana and the broader Managed Care Organization (MCO) sector that focuses on Medicare Advantage (MA) before increasing their investment stakes.
Humana is expected to continue experiencing wide volatility and a range of potential earnings outcomes. According to Deutsche Bank, investor confidence is hampered by low visibility into the drivers of earnings. These are believed to be largely determined by administrative processes rather than the company's competitive market offerings.
In other recent news, Cigna (NYSE:CI) and Humana are exploring merger possibilities once again. This follows Cigna's earlier attempt to acquire Humana that was abandoned due to disagreements over the purchase price. On another front, Cigna, CVS, and UnitedHealth (NYSE:UNH) have requested the recusal of U.S. Federal Trade Commission Chair Lina Khan and other commissioners from a lawsuit alleging wrongful insulin price hikes.
Turning to Medicare plans, both CVS and Cigna have announced new offerings for 2025 with an emphasis on affordability. Some beneficiaries will have the opportunity to enroll in plans that offer a $0 monthly premium on prescription drugs. Additionally, Bernstein SocGen Group reiterated its positive stance on Cigna, highlighting the company's unique position in the specialty drug market which is valued around $400 billion.
Finally, Cigna reported a significant increase in its second-quarter earnings for 2024, with total revenue of $60.5 billion, marking a 25% growth year-over-year, and adjusted earnings per share of $6.72, a 10% increase. The robust growth was primarily driven by its Evernorth Health Services and Care Services segments.
InvestingPro Insights
While Deutsche Bank maintains a cautious stance on Humana Inc. (NYSE:HUM), recent data from InvestingPro provides additional context to the company's financial position. Despite the concerns over earnings visibility, Humana has demonstrated strong revenue growth, with a 24.4% increase in quarterly revenue as of Q2 2024. This growth could potentially address some of the concerns raised about the company's performance.
InvestingPro Tips highlight that Humana has been aggressively buying back shares and offers a high shareholder yield. These actions may be seen as management's confidence in the company's future prospects, even as analysts remain cautious. Additionally, Humana has raised its dividend for 3 consecutive years, which could be attractive to income-focused investors in the healthcare sector.
It's worth noting that while Deutsche Bank's price target is $250.00, the InvestingPro Fair Value for Humana stands at $370.96, suggesting potential upside from the current price of $320.23. This discrepancy underscores the varying perspectives on Humana's valuation in the market.
For investors seeking a more comprehensive analysis, InvestingPro offers 14 additional tips for Humana, providing a broader picture of the company's financial health and market position.
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