Humana's (HUM) Q4 results have left many investors with "questions around just how long the Stars turnaround will take outside of the ongoing [payment year 2026] litigation," Morgan Stanley said in a note to clients on Wednesday.
The investment firm highlighted the fact that there was "no color on when Stars litigation outcome is expected."
In October, Humana started legal action against the US Department of Health and Human Services and the Centers for Medicare and Medicaid Services over the 2025 Medicare Advantage's Star Ratings assigned to its plans, according to media reports.
"The Stars overhang remains a key swing factor in [Humana's] timeline to achieve target [Medicare Advantage] margins," Morgan Stanley said in the note.
The investment firm said it's reiterating "prior assumptions on the potential Stars headwind in 2026, which could amount to an unmitigated -126% headwind to EPS."
Morgan Stanley cut Humana's price target to $285 from $301 and kept the company's equal-weight rating, citing "persistent uncertainty."
Price: 265.99, Change: +8.65, Percent Change: +3.36
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