On Monday, Jefferies, a global investment banking firm, adjusted its price target for Humana Inc . (NYSE: NYSE:HUM), a leading health insurance company, to $381 from the previous $411. Despite the reduction, Jefferies continues to recommend a Buy rating on the stock.
The price target revision comes after Cigna (NYSE:CI) halted its acquisition efforts for Humana on December 10, 2023. Since that date, Cigna's stock has seen a significant increase of 38%, while Humana's shares have experienced a downturn of 34%. This decline in Humana's stock performance has been noted alongside an adjusted earnings per share (EPS) estimate for the year 2025, which is now 32% lower than previously anticipated.
Jefferies has calculated a new potential acquisition price for Humana by Cigna at approximately $420 per share, which would be about 15.6 times the projected standalone EPS of $27 for the year 2027—a figure that aligns with the S&P 500 index's performance.
The firm's analysis suggests that an acquisition at this price could result in an 8% EPS accretion even under a conservative Medicare Advantage scenario.
In the near term, Jefferies has revised its EPS estimate for Humana in 2025 to $19.67. The updated price target of $381 takes into account a 25/75 blend of a potential takeover price of $420 and a standalone valuation of $368. This revised target reflects Jefferies' current expectations for Humana's financial performance and market position.
InvestingPro Insights
As Humana Inc. navigates the market landscape, real-time data from InvestingPro shows a company with a robust financial foundation. With a market capitalization of $39.58 billion and a price-to-earnings (P/E) ratio of 16.35, Humana appears to be valued reasonably in the current market environment. Furthermore, the company's impressive revenue growth of 14.54% over the last twelve months emphasizes its ability to increase earnings power.
InvestingPro Tips highlight Humana's strategic financial management, with the company holding more cash than debt on its balance sheet and consistently raising its dividend for 7 consecutive years. This prudent approach to capital allocation is further underscored by a strong free cash flow yield, as indicated by its valuation. For investors seeking income, it's worth noting that Humana has maintained dividend payments for 14 consecutive years, with a dividend yield of 1.08% as of the latest data.
For those interested in deeper analysis and additional insights on Humana, InvestingPro offers more tips on the company's performance and prospects. With the next earnings date scheduled for April 24, 2024, potential investors can get an additional 10% off a yearly or biyearly Pro and Pro+ subscription using the coupon code PRONEWS24. There are 9 more InvestingPro Tips available, providing a comprehensive look at Humana's financial health and industry positioning.
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