Humana (HUM) released its second-quarter earnings on Wednesday, surpassing expectations and causing a significant surge in its stock price. The company recorded a revenue of $26.75 billion, marking a 13% increase compared to the same period last year. This figure exceeded analysts’ estimates of $26.23 billion. Additionally, Humana’s adjusted earnings-per-share (EPS) of $8.94 slightly outperformed analysts’ forecast of $8.82 per share.
One particularly positive aspect was Humana’s companywide benefits expense ratio, also known as the medical loss ratio (MLR), which came in at 86.1%—lower than Wall Street’s estimate of 86.5%.
As a result, Humana’s shares jumped more than 5% in Wednesday’s trading session, reaching $482.70 per share. This spike in stock price reflects the company’s strong performance and management’s reassuring commentary on medical-cost trends.
Earlier in June, Humana’s stock price had taken a hit when UnitedHealth Group (UNH) warned about rising medical costs among older Americans undergoing elective procedures. Humana acknowledged a similar trend and anticipated its benefits expense ratio to be at the higher end of its full-year guidance range of 86.3% to 87.3%.
During the post-earnings conference call, Humana’s CEO, Bruce Broussard, expressed confidence in the firm’s ability to grow earnings next year within its historical long-term target range of 11% to 15%. Broussard also mentioned the company’s $37-per-share target for 2025, which further instilled confidence in investors.
Looking ahead, Humana revised its outlook for 2023 individual Medicare Advantage membership growth, expecting an increase of 50,000 members to reach approximately 825,000 members. This represents an 18% growth rate compared to enrollment levels at the end of 2022, surpassing industry average expectations.
Humana’s management remains optimistic about another robust year of membership growth in 2024. The company reaffirmed its full-year adjusted EPS target of at least $28.25 and maintained its guidance for full-year cash flow and capital expenditures.
In terms of capital allocation, Humana plans to increase its share repurchases this year from $1 billion to $1.5 billion. The company has already repurchased $800 million of stock since March.
Overall, Humana’s strong second-quarter results and positive outlook have reestablished investor confidence and positioned the company for continued growth in the coming years. With its stock price predicted to climb to around $512 per share, the future looks promising for Humana.
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