The Fate Of Humana Rests In The Hands Of A Federal Judge

Humana Inc HUM shareholders are watching and waiting patiently for a federal judge to determine the fate of the proposed mega-merger between Humana and Aetna Inc AET. The U.S. Department of Justice filed suit to block the merger on antitrust grounds, and both sides presented closing arguments on December 30.

Analyst Commentary

According to Argus analyst David Toung, there is too much uncertainty involved in the stock right now to make Humana a compelling Buy.

“Humana shares currently trade at 18.9-times our 2017 EPS estimate, well above the average of 15.8 for our coverage universe of managed care stocks,” Toung pointed out.

Humana has delivered strong earnings growth in recent quarters, but its valuation and potential headline risk offset its solid fundamental performance.

The judge overseeing the merger case has not set a ruling date.

The DoJ has argued that the two companies’ Medicare Advantage plans would potentially cover too much of the market in certain regions of the country. Aetna argues that the DoJ has defined the market too narrowly and contends that the government-run traditional Medicare program should be considered competition nationwide for eligible seniors. In addition, Aetna and Humana have planned to divest 290,000 members to Molina.

Argus has a Hold rating on Humana stock.