Humana Inc. (HUM) shares soared on Friday, October 9, after the Centers for Medicare and Medicaid Services (CMS) released new Medicare Advantage star ratings. The sharp stock increase (the best since March 2020) was driven by its primary Medicare Advantage contract securing a 4-star rating for 2027, up from 3.5 stars in 2026.
For background, plans rated 4 stars or higher receive a 5% benchmark rate advantage over lower-rated plans, so this rating recovery is a massive win for Humana’s profit outlook. All told, Humana says 95% of its Medicare Advantage members will be in 4-star plans for 2027, according to the Wall Street Journal.
I had a “Hold” rating on HUM back in November 2025. I was simply not upbeat enough, as the stock has soared by 64% since then, outperforming the S&P 500 by more than 50 percentage points. Today, I reiterate a “Hold” rating. While the CMS star-rating news was exceptionally bullish, shares now appear appropriately priced. The stock did break out above a key technical level, however.
HUM Prints Multi-Year Highs After The CMS News
Back in July, Humana reported a solid set of quarterly results. Q2 non-GAAP EPS of $7.61 topped the Wall Street consensus forecast of $7.00, while revenue of $40.9 billion was a notable $310 million beat. The management team didn’t lift the full-year guide, though, which cast a bit of a cloud on the stock after a remarkable March through June rally.
Shares indeed declined by 6.0% in the session that followed, matching the worst post-earnings slide back to July of 2024. Looking ahead to the November 6 Q3 report, the options market prices in a moderate 6.2% earnings-related stock price swing based on the at-the-money straddle expiring soonest after the release. Shares of the $48 billion market cap Health Care sector company trade with elevated implied volatility of
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