NEW YORK (TheStreet) -- Shares of Humana Inc  (HUM) are lower by 0.5% to $172.67 in pre-market trading Wednesday, after analysts at Sterne Agee lowered its rating on the company to "underperform" from "neutral" this morning.

The firm also slashed its price target to $150 from $165 on shares of the hospital operator, citing a lower chance of the company being acquired. Sterne Agee said speculation about a takeover is "wishful thinking" at current share levels.

Analysts also see potential earnings downside in the coming quarters, saying there is "material" risk to Humana's earnings guidance risk with paid claims outpacing premium growth. 

Louisville, Ky.-based Humana is engaged in providing health insurance and medicare plans to individuals, families, seniors, servicemen and servicewomen, and veterans.

It operates in three segments including retail, employer group, and healthcare services. 

Separately, TheStreet Ratings team rates HUMANA INC as a Buy with a ratings score of B+. TheStreet Ratings Team has this to say about their recommendation:

"We rate HUMANA INC (HUM) a BUY. This is driven by a number of strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its increase in net income, robust revenue growth, largely solid financial position with reasonable debt levels by most measures, solid stock price performance and reasonable valuation levels. We feel its strengths outweigh the fact that the company shows weak operating cash flow."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The net income growth from the same quarter one year ago has greatly exceeded that of the S&P 500, but is less than that of the Health Care Providers & Services industry average. The net income increased by 16.8% when compared to the same quarter one year prior, going from $368.00 million to $430.00 million.
  • Despite its growing revenue, the company underperformed as compared with the industry average of 18.5%. Since the same quarter one year prior, revenues rose by 18.1%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The current debt-to-equity ratio, 0.38, is low and is below the industry average, implying that there has been successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.22, which illustrates the ability to avoid short-term cash problems.
  • Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 38.21% over the past year, a rise that has exceeded that of the S&P 500 Index. Regarding the stock's future course, although almost any stock can fall in a broad market decline, HUM should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • You can view the full analysis from the report here: HUM Ratings Report

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