Humana, Inc. (HUM) is one of the largest publicly traded health benefit companies in the U.S. and Puerto Rico. We regard the reaction to the recently revised FY08 guidance by the company, following updated projections for the company's FY08 stand-alone PDP segment, as overdone.
Notwithstanding the company's exposure to reimbursement risk through its reliance on Medicare, recent acquisitions such as OSF HealthPlans, and TRICARE's recently issued formal request for proposal to managed care providers, augur well for earnings stability over the long term. We believe the stock is attractive at current levels and move to a Buy recommendation.
The company's new product design has in recent years focused on meeting the demand for greater self determination by employers and members for varying levels of co-payments, deductibles, coinsurance, benefits levels and price. Restructuring initiatives and increased use of technology have streamlined operations and improved operational efficiencies over recent years.
We have valued HUM on a forward price/earnings (P/E) basis, as well as a comparison to similar firms in the managed care sector. Our $52 price target is derived using a P/E multiple of 12.7 times (x) FY08 EPS of $4.10.
Read the full analyst report on HUM.
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