Humana (HUM) Stock Falls After Earnings Beat Fails to Lift Forecast

TLDR

• Humana beat Q1 adjusted EPS estimates, posting $10.31 vs. the $10.19–$10.20 expected
• Stock fell as much as 7.4% in premarket trading despite the earnings beat
• Full-year adjusted EPS guidance held at $9, but reported profit outlook was cut to $8.36 from $8.89
• Lower Medicare Advantage Star Ratings for 2026 are dragging on bonuses and reported earnings
• CEO flagged a growing gap between medical costs and federal government funding

Humana beat Wall Street’s first-quarter earnings estimates on Wednesday, but investors weren’t impressed. The stock dropped as much as 7.4% in premarket trading after the health insurer kept its full-year profit forecast unchanged while rivals raised theirs.

Humana Inc., HUM

Adjusted earnings came in at $10.31 per share, beating analyst estimates of around $10.19–$10.20. Revenue rose to $39.65 billion, up from $32.11 billion a year ago, and also topped expectations of $39.37 billion.

But the headline beat wasn’t enough to lift sentiment.

Morningstar analyst Julie Utterback pointed out that investors may have expected Humana to raise its outlook given the strong start to the year. That didn’t happen.

The company held its full-year adjusted earnings guidance at at least $9 per share. On a reported basis, the outlook was actually cut — down to at least $8.36 a share from the previous forecast of at least $8.89.

The reduction reflects charges tied to a multiyear transformation program, including severance, asset impairments, and outside consulting costs.

Medicare Star Ratings Weigh on Earnings

A key part of the story is Humana’s lower Medicare Advantage Star Ratings for 2026. These ratings, on a scale of one to five stars, are tied directly to bonus payments from the federal government. Lower ratings mean fewer bonuses.

The company has been flagging this headwind for some time. Net income for Q1 came in at $9.83 per share, down from $10.30 a year earlier — a direct reflection of that pressure.

CEO Jim Rechtin said medical service use and costs remained in line with expectations. But he noted the gap between what the company spends on care and what the government pays has grown compared to last year.

Benefit Ratio Comes in Better Than Expected

One bright spot: Humana’s insurance segment benefit ratio — the share of premiums spent on medical costs — came in at 89.4% for Q1. That was better than the company’s own outlook of just under 90%, and better than the 89.7% Wall Street had expected.

The lower the ratio, the better for the insurer. A reading below 90% is generally seen as well-managed.

For Q2, Humana expects that ratio to rise to slightly above 91%, which signals some cost pressure ahead.

The company also noted that overall medical and pharmacy cost trends are running slightly better than expected, which Cantor analyst Sarah James described as one of the few positives in the print.

Humana said it will adjust benefits as needed to stay on track for stable margins. The U.S. government announced earlier this month it would raise Medicare Advantage payments by 2.48% on average in 2027.

The stock was last down around 2% in premarket trading after initially dropping 7.4%.

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