Credit Suisse Remains Sidelined on Humana (HUM) After Meeting with Management
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Credit Suisse reiterated a Neutral rating on Humana (NYSE: HUM), and raised the price target to $188.00 (from $175.00), after meeting with the company's CFO and VP/IR.
Analyst Scott Fidel commented, "We hosted HUM's CFO and VP/IR for investor meetings in NYC. Relative to AET deal, HUM believes it has a case worth arguing in court against the DOJ's more narrow view on Medicare market definition; it believes its divestiture plan satisfies stated regulatory concerns. We apply a 20-30% probability weighing to our HUM TP for the AET deal. The CFO also discussed HUM's stand-alone "Plan B" strategy if the deal does not go through. HUM expects to have "multi-billion dollars" of deployable capitol to invest assuming debt/capitol of 30-35%; deployment would strike a balance between share buybacks (including a potential ASR) and strategic investments. The CFO flagged pharmacy, clinical and provider services as primary areas of investment in a Plan B. HUM sees high acuity segments of Medicaid also as an area of focus while skeptical on LT growth prospects for traditional TANF. Finally, while HUM has committed to exit 75% of its Commercial individual business in 2017, the CFO sees a place for Commercial small group (and even a bit of large group/ASO) in its LT stand-alone plans.
Shares of Humana closed at $179.63 yesterday.
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