Humana (NYSE:HUM) Margins, Earnings Shrinking

With premium rates remaining level and Humana (NYSE:HUM) maintaining its benefit levels, Jefferies sees them having lower margins and earnings and maintain a "Hold" rating on them.

Jefferies said, "HUM is maintaining MA benefit levels against static MA premium rates. As margin and EPS shrinks more than expected, the pullback doesn't yet create a compelling enough entry valuation."

Earnings per share estimates were dropped to $5.54, with revenue lowered to $35.3 billion.

They added guidance could be exceeded on these three things:

"1) higher membership growth, 2) a larger impact from its recently installed clinical management programs, 3) continued moderate cost trends (in MA or Commercial), or 4) risk adjustments."

Humana closed Friday at $56,03, dropping $0.78, or 1.37 percent. Jefferies has a price target of $65 on them, increasing it from $61. Volume was up significantly from the 3-month daily average.