HUM - Embedded Expectations Analysis - 2018 12 05
Humana Inc. (HUM:USA) currently trades near recent averages relative toUAFRS-based (Uniform) Earnings, with a 23.0x Uniform P/E. At these levels, the market has bearish expectations for the firm, and management may have concerns about their Medicaid market strength, higher outpatient costs, and coverage plan pricing
Specifically, management may lack confidence in their ability to sustain higher foot traffic driven by their addition of health coaches in JV, and in their statement that the Medicaid market is a great target for their clinical programs. Moreover, they may have concerns about the strength of their existing Medicaid membership base, and about their ability to sustain improved consolidated operating cost ratios. Additionally, they may have concerns about higher outpatient costs, and the impact of lower utilization on their adjusted EBITDA in their Healthcare Services segment. They may also be concerned about trends of members filling new therapies with third-party vendors rather than Humana Pharmacy in their Specialty pharmacy business, and may be overstating the effort they put into reducing their admin spend. Also, they may lack confidence in their ability to drive stronger relationships with their broker outreach, and to understand risk and properly price it through their coverage plans
Humana is a holding company. Through its subsidiaries, the company is a health and well-being company. The company manages its business with three segments: Retail, which consists of products sold on a retail basis to individuals including medical and supplemental benefit plans, such as Medicare and state-based Medicaid Contracts; Group and Specialty, which consists of employer group commercial fully-insured medical and specialty health insurance benefits, including dental, vision and life insurance benefits, as well as administrative services only; and Healthcare Services, which includes pharmacy solutions, provider services, clinical care services, and predictive modeling and informatics services
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