What Happened?
Shares of health insurance company Humana (NYSE: HUM) jumped 4.9% in the morning session after the company reported better-than-expected second-quarter results and raised its full-year financial guidance. The health insurer lifted its forecast for full-year adjusted earnings to approximately $17 per share, up from a prior estimate of about $16.25 and surpassing analysts' projections. Humana also increased its annual revenue guidance to at least $128 billion. Adding to the positive news, the company signaled that its decline in Medicare Advantage membership would be less severe than previously feared, forecasting a loss of up to 500,000 members instead of 550,000. This strong report and optimistic outlook provided a notable contrast to the more disappointing guidance recently issued by some of its peers in the health insurance sector, boosting investor confidence.
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What Is The Market Telling Us
Humana’s shares are quite volatile and have had 15 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 12 days ago when the stock dropped 3.2% after the company lost a lawsuit seeking to reverse cuts to its Medicare bonus payments. A Texas district court ruled in favor of the U.S. government, affirming the Medicare program's downgrade of Humana's quality ratings. This decision was a significant blow to the insurer, which had challenged the cut to its 2025 Medicare Advantage Star Ratings. The ratings are crucial as the Centers for Medicare and Medicaid Services (CMS) provides annual bonus payments to plans that earn four or more stars. The court's decision means the lower ratings, which will squeeze the company's profits in 2026, will stand. This legal defeat created uncertainty for the health insurer, which had previously seen the percentage of its members in 4-star or higher rated plans drop significantly.
Humana is down 1.3% since the beginning of the year, and at $249.45 per share, it is trading 38.3% below its 52-week high of $404.52 from July 2024. Investors who bought $1,000 worth of Humana’s shares 5 years ago would now be looking at an investment worth $625.91.
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