Humana (HUM) faces multiple headwinds into 2027, including funding uncertainty and Star volatility that raise the risk of a more gradual recovery in earnings than management expects, Morgan Stanley said in a Thursday research report.

Management expects better cohort economics and operating leverage this year, but the magnitude of Stars dislocation, rate pressure, and the scale of newly added membership base could indicate that earnings recovery is more gradual than implied by the company's long-term framework, according to the note.

Even a modest underperformance in Stars could delay margin recovery, and 2027 will likely be a partial repair year for the company rather than a full step forward toward normalized earnings, according to Morgan Stanley.

The brokerage now expects 2026 adjusted EPS of $9.10 from $12.02 earlier. It also cut its revenue guidance to $162.80 billion from $146.24 billion.

The brokerage said it reiterated its underweight rating on the stock and cut its price target to $146 per share from $174.

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