Humana Stock Tumbles After Q2 Earnings Beat, Issues Sub Par Profit Outlook

 Humana Inc (NYSE:HUM) posted second-quarter adjusted EPS of $6.96, down from $8.94 a year ago, beating the consensus of $5.85.

“This outperformance was driven by higher than anticipated revenue in our MA business, combined with favorable claims development and lower than planned administrative expenses, some of which is considered timing in nature,” the company said.

The company reported revenues of $29.54 billion, up from $26.75 billion, beating the consensus of $28.51 billion.

The sales increased on higher per-member Medicare premiums, and Medicare Advantage and state-based contracts membership growth.

“Revenue for the quarter was slightly favorable to expectations driven by the higher than anticipated membership growth, along with slightly higher than anticipated member risk scores,” Humana’s management team said in prepared remarks.

Humana ended the second quarter with 16.3 million in total medical membership, down from 17.13 million a year ago.

Medicare Advantage membership reached 5.62 million, up from 5.27 million a year ago.

The benefit ratio increased to 89.0% from 86.3% a year ago, positively impacted by favorable claims development and slightly higher than anticipated member risk scores. This favorability was partially offset by higher MA net inpatient costs.

Humana experienced favorable claims development in the quarter, primarily due to lower inpatient unit costs, observation stays, and higher claim recoveries.

This favorability was partially offset by higher-than-anticipated inpatient admissions, which increased above expectations in the back half of the quarter.

Guidance: Humana raised its 2024 individual Medicare Advantage annual membership growth expectations by 75,000 to a new target of 225,000.

The company reaffirms 2024 adjusted EPS of ~$16.00 versus the consensus of $20.31. Humana expects a 2024 insurance segment benefit ratio of approximately 90%.

“Looking ahead to 2025, we are focused on driving growth and further productivity across the enterprise to support sustainable earnings growth,” Humana said.

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