Humana Inc.’s stock fell 17% early Thursday, after the managed care company’s quarterly loss widened amid soaring medical costs and it cut its 2024 profit guidance to almost half what analysts were forecasting.
Louisville, Ky.-based Humana
HUM,
said it now expects 2024 per-share earnings of about $14.87 and adjusted EPS of about $16.00, while FactSet is expecting $29.14. The company is expecting higher Medicare Advantage costs that battered earnings in the fourth quarter to persist through the year.
Humana posted a loss of $491 million, or $4.42 a share, for the fourth quarter, wider than the loss of $71 million, or 12 cents a share, posted in the year-earlier period.
The company’s adjusted per-share loss came to 11 cents, while FactSet was expecting EPS of 89 cents.
Revenue rose to $26.462 billion from $22.439 billion, ahead of the $25.491 billion FactSet consensus.
The loss reflects additional increases in Medicare Advantage cost trends, which rose on higher-than-expected inpatient utilization, mostly in November and December, along with an increase in non-inpatient trends.
Humana and rivals including UnitedHealth Group Inc.
UNH,
have invested generously in the government’s Medicare Advantage program for seniors.
Earlier in January, Humana warned that its fourth-quarter medical loss ratio, a measure of premiums paid to cover medical expenses, had climbed to 91.4%, above the 89% expected by analysts.
The company also warned of slower-than-expected Medicare Advantage enrollment growth. The company said it hadn’t been able to offset those expenses with administrative cost cuts and productivity improvements “due to the recency and significance of the latest emerging trends.”
On Thursday, Humana confirmed it expects Medicare Advantage annual membership growth of about 100,000, or 1.8%.
UnitedHealth shares also tumbled last week after the company reported rising medical costs relative to premium revenue in the fourth quarter.
The stock has fallen 20% in the last 12 months, while the S&P 500
SPX,
has gained 21%.
