Disappointing Q4 Results and Bleak Outlook Cause Humana Shares to Plummet by 15%

Louisville, Kentucky – Shares of Humana plunged by over 15% in early trading today following the release of disappointing fourth-quarter financial results and a bleak outlook for the future. In Q4, the company reported a 17.9% increase in revenue to $26.4 billion. However, it shocked investors with an earnings per share (EPS) of -$0.11, far below the Street’s estimate of $0.76. This compares to an EPS of $1.97 in the same period last year. The underperformance in Q4 was mainly attributed to higher Medicare Advantage medical cost trends and higher-than-expected inpatient utilization.

Humana also witnessed a rise in its benefits expense ratio, which indicates insurance coverage costs as a percentage of revenue earned from insurance premiums. It increased from 87.3% in the previous year to 90.7% in Q4. Days in claims payable decreased from 45.9 to 41.4. While the company’s Centerwell segment generated $387 million in operating income, its Insurance segment reported $426 million in operating losses, compared to an operating profit of $46 million in the same period last year.

Looking ahead, Humana anticipates an adjusted EPS of $16 for fiscal year 2024, down from $26.09 in 2023. The company expects the higher Medicare Advantage medical costs to continue throughout 2024.

Despite the disappointing financials, analysts on Wall Street maintain a Strong Buy consensus rating on Humana, with an average price target of $539.61. However, the stock is currently trading at $343.3 at the time of writing.

In summary, Humana’s stock experienced a sharp decline after the company reported weak Q4 numbers and provided a bleak outlook for the future. The significant decrease in earnings per share, coupled with higher medical costs, contributed to the disappointing performance. Analysts remain optimistic about the stock’s prospects, but the current trading price reflects investor concerns.

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