Humana Surges as Medicare Advantage Exodus Falls Short of Doomsday Predictions

Wall Street breathes sigh of relief—for now.

Humana just dodged a bullet. The health insurer's Medicare Advantage bleeding wasn't nearly as bad as feared, triggering an outlook boost that sent shares climbing. Turns out seniors aren't fleeing en masse after all—who knew?

The fine print:

- Membership drops came in under projections (because in healthcare, 'less terrible' counts as a win)

- Revised guidance suggests the gravy train might keep rolling... until next quarter's 'unexpected' headwinds

Funny how these 'unforeseen challenges' keep appearing right after earnings calls. Maybe someone should tell Humana's actuarial team about this newfangled thing called 'data analysis.'

Bottom line: When your business model depends on government reimbursements and grandma's premiums, today's relief rally could be tomorrow's short opportunity. Enjoy the ride while it lasts.

Key Takeaways

• Humana raised its full-year outlook as it anticipates a smaller decline in Medicare Advantage membership than originally expected.
• The health insurance provider also sees a bigger gain in patient growth at its CenterWell Primary Care centers.
• Humana beat second-quarter earnings and revenue estimates.

Humana (HUM) shares took off Wednesday when the health insurer boosted its guidance as it sees fewer losses of Medicare Advantage customers than previously thought.

The company now anticipates full-year adjusted earnings per share (EPS) of about $17.00, up from its previous outlook of approximately $16.25. It expects revenue to be at least $128 billion, versus the earlier forecast of $126 billion to $128 billion. Humana estimated Medicare Advantage membership will drop as many as 500,000 members, lower than its former prediction of approximately 550,000.

In addition, it sees its CenterWell Primary Care medical treatment centers for senior citizens to have a net patient growth of 50,000 to 70,000. Its prior guidance was for an increase of 30,000 to 50,000.

The company also reported second-quarter profit and sales that exceeded analysts' expectations, with adjusted EPS of $6.27, and revenue nearly 10% higher year-over-year to $32.39 billion. 

Humana credited the results to outperformance at CenterWell on higher-than-anticipated prescription volumes and favorable drug mix, as well as higher insurance revenue as Medicare Advantage membership came in above expectations.

Despite today's 5% gains, shares of Humana remain slightly lower year-to-date.

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