Biotech
Thursday, January 25th, 2024 5:17 pm EDT
Key Points
- Humana’s Plunge and Bleak Earnings Guidance: Shares of health insurer Humana took a significant hit as the company issued a dismal full-year earnings guidance, attributing it to escalating medical costs affecting the broader insurance industry. The surge in expenses is linked to a growing number of older adults returning to hospitals for delayed pandemic procedures, particularly joint and hip replacements. The company expects adjusted earnings for 2024 to be around $16 per share, which is just over half of the $29.10 per share expected by analysts.
- Industry-Wide Concerns and Impact on Stock Market: Humana’s bleak forecast intensified Wall Street’s concerns about health insurance company profits declining due to a notable increase in medical costs. This sentiment reverberated across the health insurance sector, impacting the stock market. UnitedHealth also reported a rise in medical costs, albeit less severe than Humana’s, contributing to a broader decline in health insurance stocks. Shares of UnitedHealth and CVS Health fell more than 6% and 4%, respectively, while Cigna’s stock and Centene shares both slid about 4%. Elevance Health also experienced a 2% decline.
- Factors Affecting Humana and Outlook for 2024: The expectations for Humana’s 2024 earnings guidance were already low following the company’s warning the previous week about higher-than-expected medical costs in the fourth quarter. This pessimism was confirmed as Humana reported a medical benefit ratio of 90.7% for Q4, surpassing analysts’ estimated 89.7%. The insurer cited an increase in outpatient services, such as orthopedic surgeries, and a surge in inpatient care in November and December among patients enrolled in Medicare Advantage plans. Despite beating revenue estimates with $26.46 billion in Q4, Humana posted a substantial loss of $591 million, or $4.42 per share—contrasting with a $71 million loss, or 12 cents per share, during the same period a year ago. Excluding certain items, Humana reported a loss of 11 cents per share, deviating from analysts’ expectations of 15 cents per share.
Shares of health insurer Humana experienced a sharp decline as the company issued a disappointing full-year earnings guidance, citing escalating medical costs impacting the broader insurance industry. The surge in expenses is linked to a growing number of older adults returning to hospitals for delayed pandemic procedures like joint and hip replacements. Humana, known for providing government-backed insurance through the Medicare Advantage program, anticipates adjusted earnings of around $16 per share for 2024—just over half of the $29.10 per share expected by analysts. This outlook heightens Wall Street concerns about health insurance company profits amidst a notable increase in medical costs. UnitedHealth also reported a rise in medical costs, albeit less severe than Humana’s, contributing to a broader decline in health insurance stocks. Humana’s shares plummeted over 10%, influencing drops of more than 6% and 4% in UnitedHealth and CVS Health shares, respectively. Cigna and Centene also experienced declines of about 4%. In contrast, Elevance Health fell 2% but forecasted 2024 earnings above estimates, attributing it to higher premiums in its commercial business controlling medical costs in Q4.
Anticipations for Humana’s 2024 earnings guidance were already low after the company’s warning last week about higher-than-expected medical costs in Q4, signaling potential profit cuts in the coming year. The confirmed pessimism was underscored by Humana reporting a medical benefit ratio of 90.7% for Q4, exceeding analysts’ estimated 89.7%. The insurer pointed to increased outpatient services, including orthopedic surgeries, and a surge in inpatient care in November and December among Medicare Advantage enrollees. Medicare Advantage plans, privately run versions of the federal Medicare program for individuals aged 65 and older, represent one of Humana’s major coverage forms beyond its offerings for military families and retirees. Despite posting Q4 revenue of $26.46 billion, surpassing analysts’ estimates, Humana reported a loss of $591 million, or $4.42 per share—a significant increase from the $71 million loss, or 12 cents per share, during the same period a year ago. Excluding certain items, Humana reported an 11 cents per share loss, deviating from analysts’ expectations of 15 cents per share, according to LSEG data.
For the full original article on CNBC, please click here: https://www.cnbc.com/2024/01/25/humana-reports-grim-2024-forecast-due-to-soaring-medical-costs.html
