Why Humana Deserves Patience Now: Too Early to Buy, Too Risky to Sell

Humana Inc. HUM has tested investor conviction over the past year as rising medical costs, reimbursement uncertainty, and Medicare Advantage (MA) headwinds weighed heavily on sentiment. After a steep decline from prior highs, the stock now sits at a crossroads. The key question for investors isn’t whether Humana is struggling; it’s whether the worst is already priced in.

Despite ongoing volatility, Humana’s performance has been relatively resilient. Over the past year, HUM shares are up 1.8%, sharply outperforming the broader industry, which declined 28.3%. The stock has also held up better than peers like UnitedHealth Group Incorporated UNH and Centene Corporation CNC, which fell 35% and 32.6%, respectively, even as the S&P 500 surged more than 20%. That relative strength suggests investors are not ready to give up on the story.

Price Performance – HUM, UNH, CNC, Industry & S&P 500

At current levels, Humana does not present a compelling near-term buying opportunity. However, the company’s fundamentals also do not warrant abandoning the stock altogether. Let’s dig deeper.

Near-Term Pressures to Watch

Humana continues to feel the impact of elevated medical costs, particularly within its Medicare Advantage book. Higher utilization trends, inpatient admissions and outpatient procedures have kept its medical care ratio under pressure. While the company has taken pricing and benefit actions to stabilize margins, the full impact of those moves is unlikely to be felt immediately. Regulatory uncertainty around MA reimbursement rates remains an overhang. These factors limit upside in the near term and explain why the stock has struggled to regain sustained momentum.

Long-Term Tailwinds

Despite these challenges, Humana’s long-term investment case is far from broken. The company remains one of the largest pure-play Medicare Advantage providers in the country, with strong brand recognition and a deeply integrated care delivery platform. The aging U.S. population continues to be a powerful secular tailwind. Its focus on value-based care, home health and primary care integration should support better cost control over time, even if near-term results remain uneven.

Valuation & Average Price Target

Valuation, however, is not especially compelling. Humana trades at a forward 12-month P/E of 21.26X, above both its five-year median of 17.69X and the industry average of 15.63X. In comparison, UnitedHealth and Centene trade at lower multiples of 18.69X and 13.91X, respectively.

That said, the stock is currently priced below the average analyst target of $284.87, implying upside of about 10%. The spread between the high target of $341 and the low target of $215 reflects different risk views, but the consensus direction remains positive.

Favorable Estimates

The Zacks Consensus Estimate for HUM’s 2025 EPS is pegged at $17.08, indicating 5.4% year-over-year growth. The same for revenues indicates a 10% increase from a year ago to $128.94 billion. HUM beat earnings estimates in three of the past four quarters and missed once, with an average surprise of 7.5%.

Bottom Line

Humana lacks a clear catalyst to drive a sharp rebound in the immediate future. However, the stock’s sell-off has already reflected much of the operational and regulatory risk. Selling now could mean missing a gradual recovery as margin initiatives take hold and utilization trends normalize.

For investors already holding the stock, patience appears to be the most rational strategy. Humana remains a high-quality managed care name facing cyclical and regulatory headwinds, not a structurally broken business. For new investors, staying on the sidelines while monitoring cost trends and reimbursement clarity is the prudent move for now. Humana currently has a Zacks Rank #3 (Hold).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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