On Thursday, Baird, a financial services firm, adjusted its price target for Humana (NYSE:HUM), a health insurance company, to $270.00 from the previous $374.00. Despite this change, Baird is maintaining a Neutral stance on the company's stock. The adjustment comes as Humana's shares have declined over 47% in the past year, with InvestingPro data showing the stock currently trading significantly below its Fair Value.
The new price target represents a 28% decrease from the former target but suggests a potential 13% upside from the current trading level. The valuation is set against an 18 times price-to-earnings (P/E) multiple of Humana's estimated 2026 earnings per share (EPS) of $15.00. According to InvestingPro, Humana maintains a "GOOD" overall financial health score, with particularly strong marks in profitability metrics. InvestingPro subscribers have access to 8 additional key insights about Humana's financial position.
Baird's decision to apply an 18x P/E multiple is informed by Humana's five-year median P/E multiple. The firm considers this multiple to be appropriate and does not anticipate significant expansion of the multiple over the next year. This expectation is based on the current market headwinds affecting the Medicare Advantage (MA) sector, which is a significant part of Humana's business.
The analyst from Baird expressed that the revised price target and neutral rating take into account the challenges that may affect the company's growth. They noted that while there is some potential for an increase in the stock's value, the opportunities for a notable increase in the P/E multiple are limited for the forthcoming year due to the existing Medicare Advantage headwinds.
In other recent news, Humana Inc (NYSE:HUM). has faced a significant shift in its financial landscape. The healthcare company is dealing with potential earnings exposure from its Humana Honor plans, which primarily cater to veterans, as highlighted by Piper Sandler's scenario analysis. The analysis suggests that these plans could contribute $5.16 of adjusted earnings per share (EPS) in 2024, but also pose a significant earnings risk in 2025.
In light of these findings, Piper Sandler reaffirmed its neutral rating on Humana shares and set a $270.00 stock price target. Meanwhile, Deutsche Bank (ETR:DBKGn) maintained a "Hold" rating on Humana shares with a steady price target of $248.00, despite the announcement of a significant change in Humana's 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.
On the other hand, UnitedHealth Group Inc (NYSE:UNH). faced public backlash following the shooting death of executive Brian Thompson, leading to increased scrutiny on the health insurance industry. Despite these challenges, 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.
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