Zacks Investment Research upgraded shares of Humana Inc. (HUM) from NEUTRAL to OUTPERFORM on July 18, 2013, with a target price of $103.00.
We are upgrading Humana to Outperform based on the company's strong financial position, membership growth in Medicare, stable ratings, and rapid expansion through acquisitions. These positives offset the company's dependence on Medicare Advantage plans, rising expenses, adverse impact of healthcare reform, and high competition. Humana's first-quarter earnings surpassed the Zacks Consensus Estimate due to higher revenues and lower benefit expenses. Strong operating performance in most segments and lower-than-expected tax rate also boosted income. Higher membership and upgraded earnings guidance were the other positives. However, the operating cost, and investment income deteriorated. Overall, we believe that the company needs to follow prudent expense management and focus on growth through acquisitions and diversifying its earning sources to attract long-term investors.
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