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On Tuesday, RBC Capital adjusted its price target on shares of Humana (NYSE: HUM), reducing it to $265 from the previous target of $400. The firm sustained its Outperform rating on the healthcare company. The revision follows Humana’s disclosure in an 8-K filing last week, which confirmed a decline in star ratings based on preliminary Medicare Advantage (MA) performance data.

RBC Capital introduced their 2026 adjusted earnings per share (EPS) estimate for Humana at $16.99. This projection includes an anticipated $8.00 EPS impact resulting from lost bonus revenue in 2026 due to the lower star ratings. The new price target reflects a price-to-earnings (PE) multiple of 15.6 times RBC Capital’s 2026 earnings estimate.

The firm believes that the adjusted price target accounts for Humana’s efforts to mitigate the impact in 2027 and also allows for potential upside if the company’s pending appeals regarding the star ratings are successful. Despite the significant reduction in the price target, RBC Capital’s analysis suggests that there is still a 12% implied upside to their new target.

The adjustment in Humana’s price target is directly tied to the anticipated earnings impact from the decline in star ratings, which affects the revenue the company receives from Medicare Advantage plans. RBC Capital’s outlook remains positive, with an expectation that Humana’s mitigation initiatives could lead to recovery in the following year.

In other recent news, Humana Inc (NYSE:). has been the subject of multiple analyst adjustments due to a significant drop in its Medicare Advantage Star Ratings for 2025. Bernstein SocGen Group upgraded Humana’s stock from Market Perform to Outperform, despite a decrease in the price target to $308 from the previous $405. This reflects an improving sector outlook and potential upside catalysts, balanced against anticipated risks.

Conversely, Jefferies, Piper Sandler, and BofA Securities downgraded their ratings for Humana, citing concerns about the impact of the Star Ratings on future earnings. Wells Fargo’s analysis indicates that Humana could face a revenue headwind of approximately $2.9 billion due to potential risks for certain contracts, which could translate to an $18.93 impact on earnings per share.

Despite these challenges, Humana is actively exploring options to mitigate the expected revenue headwind for 2026 related to the 2025 Star ratings. These recent developments underscore the evolving landscape for Humana and its stakeholders, as the company navigates through changes in Medicare policy and ratings.

InvestingPro Insights

Recent data from InvestingPro sheds additional light on Humana’s current financial position and market performance. Despite the challenges highlighted in the article, Humana maintains a strong revenue base with $112.04 billion over the last twelve months as of Q2 2024, representing a growth of 13.48%. This robust revenue growth underscores the company’s continued market presence in the healthcare sector.

InvestingPro Tips reveal that Humana has been aggressively buying back shares, which could be seen as a sign of management’s confidence in the company’s long-term prospects. Moreover, the company has maintained dividend payments for 14 consecutive years, demonstrating a commitment to shareholder returns even in challenging times.

However, it is worth noting that Humana’s stock has taken a significant hit recently, with a 1-month price total return of -33.79% as of the latest data. This aligns with the article’s discussion of the impact of lower star ratings on the company’s outlook.

The current P/E ratio of 12.78 (adjusted for the last twelve months as of Q2 2024) suggests that the stock may be undervalued relative to its earnings, potentially offering an opportunity for investors who believe in the company’s ability to navigate the current challenges.

For readers interested in a more comprehensive analysis, InvestingPro offers 11 additional tips for Humana, providing a deeper understanding of the company’s financial health and market position.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.



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