Evercore ISI sees Humana on path to margin recovery

Investing.com -- Evercore ISI initiated coverage of Humana with an In Line rating and a $295 price target on Monday, highlighting both medium-term uncertainties and long-term earnings growth potential.

“Humana is a ~$33 Bn market cap Medicare Advantage (MA)-focused managed care company,” analysts wrote.

While the medium-term outlook is “less clear,” Evercore ISI said that “post 2028, Humana has the right mix of assets to grow adjusted EBIT at a LDD rate (and EPS likely at a mid-teens CAGR).”

The firm noted management’s plan to restore top-quartile Stars performance by 2028, calling it “reasonable” and estimating that “~70%+ of MA members” could be enrolled in 4-Star or higher plans by then.

Evercore ISI said this would be “a meaningful tailwind to EPS,” though it is not assuming a Stars benefit for 2027.

On costs, Evercore ISI is modeling “the benefit of the low end of the operating leverage targets” of $1.6–2.0 billion, while acknowledging “execution risk is high.”

The analysts added: “We remain somewhat worried about the murky competitive dynamics raising the potential for mispricing for Medicare Advantage in 2026.” That could lead to “higher-than-expected member growth and utilization in 2026.”

Looking longer term, Evercore ISI argued that Humana’s current asset mix “should help to deliver LDD EBIT growth and mid-teens EPS growth on a more normalized basis (post 2028).”

Upside drivers include “Stars restoration, cost discipline, retention-led margin expansion, and scaling CenterWell,” which together could push earnings above current forecasts.

Evercore ISI concluded that the “current valuation fairly balances the company’s risks and opportunities” while leaving “a pathway to our $295 price target.”

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