Disclosures

DISCLOSURES FOR COMPANY: Humana Inc (HUM)

IMPORTANT DISCLOSURES

Price Chart


Note: OP = Outperform; PP = Peer Perform; UP = Underperform; S = Suspended; W = Withdrawn

Wolfe Research Fundamental Stock Ratings Key

Outperform (OP): The security is projected to outperform analyst’s industry coverage universe over the next 12 months.
Peer Perform (PP): The security is projected to perform approximately in line with analyst’s industry coverage universe over the next 12 months.
Underperform (UP): The security is projected to underperform analyst’s industry coverage universe over the next 12 months.

Wolfe Research uses a relative rating system using terms such as Outperform, Peer Perform and Underperform (see definitions above). Wolfe Research does not assign ratings of Buy, Hold or Sell to the stocks it covers. Outperform, Peer Perform and Underperform are not the respective equivalents of Buy, Hold and Sell. Please carefully read the definitions of all ratings used in Wolfe Research research. In addition, since Wolfe Research research contains more complete information concerning the analyst’s views, please carefully read Wolfe Research research in its entirety and not infer the contents from the ratings alone. In all cases, ratings (or research) should not be used or relied upon as investment advice and any investment decisions should be based upon individual circumstances and other considerations.

Wolfe Research Fundamental Sector Weighting System

Market Overweight (MO): Expect the industry to outperform the primary market index for the region (S&P 500 in the U.S.) by at least 10% over the next 12 months.
Market Weight (MW): Expect the industry to perform approximately in line with the primary market index for the region (S&P 500 in the U.S.) over the next 12 months.
Market Underweight (MU): Expect the industry to underperform the primary market index for the region (S&P 500 in the U.S.) by at least 10% over the next 12 months.

Wolfe Research Distribution of Fundamental Stock Ratings (As of March 31, 2018)

Outperform (Buy): 41% (3% Investment Banking Clients)
Peer Perform (Hold): 50% (2% Investment Banking Clients)
Underperform (Sell): 9% (4% Investment Banking Clients)

Wolfe Research does not assign ratings of Buy, Hold or Sell to the stocks it covers. Outperform, Peer Perform and Underperform are not the respective equivalents of Buy, Hold and Sell but represent relative weightings as defined above. To satisfy regulatory requirements, Outperform has been designated to correspond with Buy, Peer Perform has been designated to correspond with Hold and Underperform has been designated to correspond with Sell.

Wolfe Research Fundamental Valuation Methodology

Company: Humana Inc (HUM)
Fundamental Valuation Methodology: Relative PE to S&P 500 on NTM earnings basis

Wolfe Research Fundamental Recommendation, Rating and Target Price Risks

Company: Humana Inc (HUM)
Risks That May Impede Achievement of the Recommendation, Rating or Price Target: The primary earnings risk for MCOs is that cost trend will increase more than priced for. Utilization data points in Q1 raised some concern, but our checks indicate there hasnít been an inflection point. Other industry risks include political / regulatory uncertainty heading into and post 2016 elections. For HUM specifically the key risks include the acquisition by AET not being approved, pressure on Medicare Advantage reimbursement or changes to risk adjustment, any interruption of Medicare Advantage margin improvement post 2015/2016 issues and continued drag from the individual market.

Wolfe Research Research Disclosures

Humana Inc (HUM): None.

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