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Putting Failed Aetna Deal Behind It, Humana Is Refocused On Growth; Analyst Upgrades The Stock

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Putting Failed Aetna Deal Behind It, Humana Is Refocused On Growth; Analyst Upgrades The Stock

Argus in a note released on Friday upgraded shares of Humana Inc (NYSE: HUM), with the upgrade premised on the belief that the company has strong growth prospects as an independent company following the termination of its merger agreement with Aetna Inc (NYSE: AET).

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The Annulled Deal

Aetna announced in July 2015 that it would buy Humana in a cash-and-stock deal valued at $37 billion, propelling it to the position of the second-largest health insurance company in the U.S.

Earlier this year, the companies called off the deal following regulatory hurdles.

Focus Back On Organic Growth

Analyst David Toung expects Humana to now refocus on organic growth in its Medicare Advantage programs. Additionally, the analyst sees opportunities for margin expansion, as the company exits certain underperforming markets and optimizes the business model in its health services segment.

Raising Estimates

Citing the company's upward revision of its 2017 adjusted earnings per share guidance to at least $11.10 from $10.80–$11 and strong first quarter results along with the firm's assessment of its Medicare growth strategy, it raised its earnings per share estimates for 2017 to $11.15 from $10.90 and for 2018 to $12.05 from $11.95.

As such, Argus upgraded shares of Humana to Buy from Hold and set a price target of $260.

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Latest Ratings for AET

DateFirmActionFromTo
Oct 2018Credit SuisseMaintainsNeutralNeutral
Oct 2018CitigroupMaintainsNeutralNeutral
Oct 2018PiperJaffrayDowngradesOverweightNeutral

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