On Tuesday, Piper Sandler analysts increased the price target on Humana (NYSE:HUM) shares listed on the New York Stock Exchange (NYSE: HUM) to $288 from the previous target of $270, while maintaining a Neutral rating on the stock.
The analsyts adjusted the price target (PT) methodology, shifting from a 16.0x calendar year 2025 estimated price-to-earnings (P/E) ratio to a 15.5x calendar year 2027 estimated P/E, discounted back one year at a rate of 9.5%. The new multiple of 15.5x is in line with Humana's average historical performance, not accounting for the brief period when earnings expectations were inflated due to reduced healthcare utilization and potential for higher earnings amid the COVID-19 pandemic.
The analyst's calendar year 2026 estimated adjusted earnings per share (EPS) is seen as a conservative baseline for the company's Medicare Advantage Quality Bonus Payment (QBP) and does not fully represent Humana's earning potential. It is anticipated that the recovery of Humana's Star Ratings, which affect Medicare reimbursements and bonuses, will be a gradual process spanning multiple years.
The adjusted EPS for calendar year 2027 is used to reflect what Piper Sandler considers to be the near-term earnings potential for Humana. Applying the target multiple of 15.5x to the estimated adjusted EPS of $20.35 for calendar year 2027 results in a figure of $315. This amount is then discounted by 9.5% for one year to arrive at the updated price target of $288 for Humana shares.
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