Humana: Strong Q on better‑than‑expected costs, Stars performance, Medicare Advantage margin

 

Humana beats Q3 2026 estimates, raises 2026 EPS outlook, locks in 2028 Stars tailwind and 2027 Medicare Advantage margin rebound

• Q3 2026 revenue rose 26% to $41.2B; non-GAAP EPS -$0.70, GAAP EPS $1.33, MCR 93.7% as medical costs below expectations.
• Humana raised 2026 adjusted EPS guidance from at least $9.00 to at least $9.50 on better trends.
• Full-year 2026 GAAP EPS guidance lifted to at least $15.09.
• Management expects individual Medicare Advantage pretax margin to roughly double in 2026, excluding the Stars headwind.
• Bonus Year 2028 Medicare Advantage Star Ratings achieved a 4.17 member‑weighted score, with ~95% of members in 4+ Star plans.
• 2028 Stars results create a sizable one‑time tailwind; part will fund investments, part flow to shareholders.
• For 2027, Humana sees no new headwinds beyond existing Stars drag and expects material MA margin improvement.
• Company expects 2027 Medicare Advantage membership to grow, with AEP sales and recapture ahead of plan so far.
• 2026 cost trend is running at the low end of 7%–8%; 2027 pricing assumes 8%–9% with Part D up 14%–15%.
• Medicaid membership grew 104,000 year‑to‑date; CenterWell Primary Care membership rose 147,000 (30%), including MaxHealth.
• New BlackRock JV for CenterWell clinics and Gentiva stake sale (~$900m pretax) lower leverage and boost flexibility.
• Management tone was confident and disciplined, saying earnings power and all 2028 plan levers are tracking ahead.
• Main concern: sustainability of higher 2027 medical and Part D trends and execution on competitive Medicare Advantage pricing and growth.
• Strong quarter driven by better‑than‑expected cost trends, exceptional Stars performance, and visible Medicare Advantage margin recovery.

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