Why Humana Stock Withered on Wednesday

An earnings report showing growth in key categories wasn’t enough to lift investor sentiment on the company.

Humana (HUM -3.66%) stock has not been a favorite of investors this year, and the health insurer’s first-quarter earnings report published Wednesday morning did nothing to change that. Following its release the company’s stock traded down, to the point where it closed Hump Day down by almost 4% in price. Meanwhile, the bellwether S&P 500 index did relatively better, trading more or less sideways on the day.

Revenue and adjusted net income went in opposite directions

For the quarter, Humana’s revenue according to non-GAAP (adjusted) standards totaled $29.6 billion, which was a healthy 14% higher on a year-over-year basis. Contrasting this was adjusted net income; this fell by a fairly steep 23% to just under $1.2 billion ($7.31 per share).

Both headline figures topped the consensus analyst estimates. These called for $28.5 billion in revenue and adjusted net income of $6.12 per share.

Humana, a top provider of Medicare Advantage (MA) plans, said that its better-than-expected numbers were mainly due to administrative expenses that came in lower than anticipated. Yet operating in the MA space isn’t necessarily advantageous these days. That’s because earlier this month, the U.S. Centers for Medicare and Medicaid Services (CMS) set a payment rate increase for the program that was notably lower than many expected.

Profitability guidance disappointed the market

In its earnings release and in prepared remarks about the quarter, Humana management reaffirmed its adjusted, per-share net income guidance of roughly $16 per share for full-year 2024. That, unfortunately, is under the $16.36 collective analyst estimate. The company did not provide a forecast for annual revenue.

Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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