Shares of Humana (HUM -1.77%) are down 11.7% on Thursday after the health insurance giant announced weaker-than-expected quarterly results and light profit guidance for the coming year.
Higher medical costs are eating into Humana's profits
Humana's fourth-quarter revenue grew 17.9% year over year to $26.42 billion, beating expectations for revenue closer to $25.6 billion. On the bottom line, however, Humana swung to a non-GAAP (adjusted) quarterly net loss of $0.11 per share, compared to net income of $1.97 per share in the same year-ago period and well below expectations for a net profit of $0.92 per share.
In prepared remarks, Humana management admitted it's "disappointed with the impact of the late and unexpected development of higher [medical cost] trends on our 2023 results and 2024 outlook." But the company also noted those trends are an industrywide phenomenon, and don't change the "long-term attractiveness of this sector and [Humana's] position within it."
What's next for Humana shareholders?
Humana will prioritize margin recovery over membership growth in the near term, and no longer believes it can achieve its previous target for 2025 earnings of $37 per share.
In the meantime, management issued initial guidance for full-year 2024 revenue of roughly $113 billion (up from $106.4 billion in 2023), which should translate to adjusted earnings of roughly $16 per share (down from $26.09 per share in 2023). Analysts, on average, were modeling slightly lower 2024 revenue of $110.1 billion, but significantly higher earnings of $29.10 per share.
All told, there's no sugarcoating this disappointing report. Even with shares of Humana down 20% over the last year leading into this report, it's hardly surprising to see the stock plunging in response today.