Humana (HUM) PT Raised to $230 at Jefferies; 'Upside Still trumps Downside'
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Jefferies analyst David Windley reiterated a Buy rating and boosted his price target on Humana (NYSE: HUM) to $230.00 (from $206.00) following meetings with management. The analyst said upside trumps downside.
Windley commented, "Our meetings with Humana's CFO Brian Kane explored organic improvement in the business to status of the AET deal to Trump election implications. Improved '16 EPS, a likely more favorable MA environment, and Stars mitigation strategies significantly reduce downside risk, while the potential to double (or more) MA enrollment under a Ryan-type plan introduces a significant upside scenario."
The analyst said a GOP controlled Washington should be friendlier to MA than the last one. While this doesn't mean rates return to pre-ACA levels, they believe some combination of faster enrollment growth, a more favorable rate environment, and/or sunsetting the health insurer fee lead to a meaningfully higher MA growth trajectory over Mr. Trump's first term.
Windley notes Humana is still working feverishly with AET and MOH to ensure preparedness for deal integration and divestiture. HUM seems intent on extending the deal termination date (12/31/16) unless the judge returns a negative decision before that date. Whereas AET appeared to have overpaid for HUM 9 months ago, the deal is starting to look like a bargain now...and investors recognize that.
If the DOJ successfully blocks the deal, HUM expects to initiate a sizeable buyback, including an ASR.
The firm raised FY 2017 EPS from $10.97 to $11.16.
Shares of Humana closed at $198.84 yesterday.
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