Making Sense of Humana’s Risk Factors

Humana (HUM) is an American health insurance service provider. Through its retail segment, the company provides services under the Medicare and Medicaid programs. Its group and specialty segments target employers and military services. 

For Q4 2021, Humana’s revenue rose to $21.1 billion from $19.1 billion in the same quarter the previous year but slightly missed the consensus estimate of $21.2 billion. It posted adjusted EPS of $1.24, which improved from a loss per share of $2.30 in the same quarter last year and beat the consensus estimate of $1.15.

Humana plans to distribute a quarterly cash dividend of $0.79 per share on April 29 and has set March 30 as the ex-dividend date. The newly declared dividend represents a 12.5% increase from its previously distributed dividend.

With this in mind, we used TipRanks to take a look at the risk factors for Humana.

Risk Factors 

According to the new TipRanks Risk Factors tool, Humana’s top risk category is Production, with 5 out of the total 16 risks identified for the stock. Finance and Corporate is the next major risk category with 4 risks. Humana has recently added one new risk factor and updated several previously highlighted risk factors.

The newly added risk factor falls under the Production category. The company tells investors that the success of its business depends on its ability to attract and retain talented personnel. The problem is that there is intense competition for qualified employees, which could result in increased salaries and difficulty in attracting and retaining qualified staff. Therefore, the company cautions that its business and operating results could be adversely affected if it is unable to retain qualified employees and key executives.

In an updated Legal and Regulatory risk factor, Humana informs investors that the nature of its business makes it subject to significant regulatory oversight. It explains that new regulations or changes to existing regulations could make expanding its operations difficult and increase its costs of doing business. These may have a material adverse impact on Humana’s operating results and cash flow.

In an updated Tech and Innovation risk factor, Humana cautions that a breach of its IT security systems could expose it to serious problems. The company explains that in the ordinary course of its business, it handles sensitive information, including personal and proprietary data. It warns that a cybersecurity attack could result in significant regulatory fines, reputational damage, and have a material adverse effect on its operating results and financial condition. 

Humana stock has gained about 5% over the past year.

Analysts’ Take

BMO Capital analyst Matthew Borsch recently reiterated a Hold rating on Humana stock with a price target of $415, which suggests 1.32% downside potential.

Consensus among analysts is a Moderate Buy based on 6 Buys and 8 Holds. The average Humana price target of $469.07 implies 11.53% upside potential to current levels.

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