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Piper Sandler has initiated Cigna International (NYSE:CI) and Humana (NYSE:HUM) with overweight ratings, saying that the former is poised for long-term EPS growth.
The firm has a $400 price target for Cigna (18% upside based on June 25 close) and a $392 target for Humana (10% upside).
Regarding Cigna, analyst Jessica Tassan sees 10%-14% CAGR due to its leadership position in specialty pharmacy, as well its insurance and pharmacy benefit manager businesses.
Cigna owns Evernorth Health, which runs PBM Express Scripts, specialty pharmacy Accredo and utilization management services provider eviCore healthcare.
“In our view, the businesses complement one another and should empower CI to continue delivering premium adjusted EPS growth against the LT target of 10-14% per year,” Tassan noted.
She added that the company trades at a discount compared to other names in the managed care sector.
For Humana (HUM), Tassan cited the company’s consistently high STAR ratings for its Medicare Advantage plans.
“We believe the company’s purpose-built healthcare delivery and services infrastructure should improve outcomes and bend the cost curve through center-based, at-home and pharmacy care over time,” she said.
Tassan believes that inpatient unit costs will come in lower than expected this year, which could lead to a raise in EPS guidance.