Barclays On Humana: 'Stronger Core Ops Should Offset Potential '18 MA Star Headwind'

The preliminary Medicare Advantage [MA] STAR ratings for 2018 released by CMS appear to be “a clear negative for Humana Inc HUM, Barclays’ Joshua R. Raskin said in a report. He maintained an Equal-weight rating on Humana, with a price target of $191, saying that strength in the company’s core operations should offset headwinds from the MA STAR ratings.

MA STAR Ratings

The data reflected a significant decline in Humana’s STAR ratings for 2018, with membership in 4+ STAR rated plans plummeting from 78 percent to 37 percent. This resulted in the company’s shares falling 5 percent, underperforming the peer group as well as the market, which was up 0.1 percent during the same time period.

Mitigating Factors

Analyst Raskin mentioned that the headlines from the latest CMS release appeared to be “a lot worse than the actual implications.”

Humana pre-announced its Q3 earnings, reflecting that its core operations were performing significantly better than previous guidance and consensus expectations.

Saying that the MA STAR ratings issue seemed to be “temporary in nature,” Raskin noted that there were “several mitigating factors” and that the issue had almost no impact on either the pending transaction with Aetna Inc AET or the DOJ trial that was scheduled for December 5, 2016.

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