Why Is Humana (HUM) Down 2.1% Since Last Earnings Report?

Core Viewpoint - Humana's recent earnings report shows a mixed performance with strong revenue growth driven by Medicare Advantage, but a significant decline in adjusted earnings per share and operating income year over year [2][3][7]. Financial Performance - Adjusted EPS for Q2 2024 was $6.96, exceeding the Zacks Consensus Estimate by 18.2%, but down 22.1% from the previous year [2]. - Adjusted revenues increased by 14.2% year over year to $29.4 billion, surpassing the consensus mark by 2.6% [2]. - Total premiums rose to $28.1 billion, a 10.4% increase year over year, exceeding estimates [4]. - Total operating expenses grew by 12.2% year over year to $28.4 billion, driven by higher benefits expenses [6]. Operational Insights - The benefits expense ratio worsened by 270 basis points year over year to 89% due to rising medical costs in Medicare Advantage [5]. - Operating income fell to $1.14 billion, a decrease of 20.5% year over year, but still above estimates [7]. - The Insurance segment reported adjusted revenues of $28.4 billion, a 14.1% increase year over year, while adjusted operating income dropped 29.5% to $826 million [8]. Membership and Guidance - Total medical membership decreased by 4.8% year over year to 16.3 million, below consensus estimates [9]. - Management raised the guidance for individual Medicare Advantage membership growth to approximately 225,000, up from 150,000 [16]. - The overall revenue forecast for 2024 is now $116 billion, reflecting a 9% increase from 2023 [15]. Financial Position - As of June 30, 2024, cash and cash equivalents stood at $5.5 billion, a 17.2% increase from the end of 2023 [11]. - Long-term debt rose to $11.7 billion, a 15% increase from December 31, 2023 [11]. - Total stockholders' equity grew by 2.5% to $16.7 billion from the end of 2023 [12]. Market Position and Outlook - Humana's stock has seen a downward trend in estimates, with a consensus estimate shift of -7.02% [18]. - The company holds a Zacks Rank 3 (Hold), indicating expectations for an in-line return in the coming months [20]. - Comparatively, Centene, a peer in the same industry, reported a revenue increase of 5.9% year over year, highlighting competitive dynamics within the sector [21].