Humana beats Q2, holds $9 outlook as shares drop 6%
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- Humana reported Q2 adjusted EPS of $7.61 versus the $7.22 analysts expected and revenue of $40.87 billion versus $40.61 billion expected, beating on both lines.
- The insurer maintained its 2026 adjusted profit outlook of at least $9 per share, which Cantor Fitzgerald analysts called a "disappointment" in a Wednesday note.
- Shares of Humana (HUM) fell more than 6% in afternoon trading despite the beat, as investors had ratcheted up expectations after other Medicare Advantage insurers raised their outlooks.
- CFO Celeste Mellet said the beat was driven by strength across Humana's insurance business and CenterWell healthcare services unit, with medical and pharmacy cost trends tracking in line with expectations and slight inpatient favorability among value-based providers.
- The medical benefit ratio came in at 91.2% for Q2, in line with analyst expectations but higher than the 89.9% posted a year earlier, with Mellet calling medical costs "more stable."
- Humana expects changes to its 2027 Medicare Advantage plans to drive profitability toward a sustainable pretax margin of at least 3% by 2028.
- Pharmacy medical cost trends remain "very elevated" from drug prices and new medicine launches, with Mellet saying those costs will be slightly higher next year.
Why it matters: The 6% stock slide on an earnings beat shows Wall Street had been pricing in a guidance hike after peers lifted outlooks, and Humana's flat $9-per-share hold fell short of that bar. For one of the largest Medicare Advantage providers, the unchanged outlook combined with elevated pharmacy cost trends puts weight on the company's stated path to a 3% pretax margin by 2028.
