Humana stock falls on disappointing full-year guidance

Humana (HUM) shares are falling sharply after issuing 2024 guidance that fell well short of Wall Street estimates. Humana expects to report adjusted earnings of $16 per share in 2024. Analysts had been expecting about $29. A sharp rise in Medicare Advantage medical costs has taken a toll on Humana and other managed care stocks in recent weeks,

Yahoo FInance's Seana Smith and Brad Smith break down the results.

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Editor's note: This article was written by Stephanie Mikulich

Video Transcript

SEANA SMITH: Let's take a look at shares of Humana here this morning, sinking after the company slashed its full year guidance. Humana also seeing a widening loss in its fourth quarter.

A lot of this, driven by the rise that we have seen in medical costs. We're also seeing the reaction in some of its competitors. Other insurers that are out there, UnitedHealth, Cigna, CVS, even among the names under pressure here this morning.

And to put in perspective, I guess, how short the earnings were, the results were in terms of what the Street was anticipating, their earnings for the most recent quarter, they see adjusted earnings of approximately $16 a share-- excuse me, for the guidance in 2024. That was just about half-- just over half of what analysts had expected. So certainly, their business really being pressured by the rise that we've seen in medical costs.

BRAD SMITH: Yeah, I mean, you hit the nail on the head. I mean, this most recent quarter, they said it reflects additional increases in Medicare Advantage medical costs, number one in the trends there. Also, higher than anticipated inpatient utilization. So they weren't expecting this many people to say, you know what, let me take advantage of what I signed up for here.

And that's just what they're seeing primarily for the months of November and December. So a further increase in non-inpatient trends is also what they're tracking there, but all of that playing directly into these results we saw coming.

SEANA SMITH: All that is playing directly into these results. So remember, this is a sector that had been under pressure over the last week ever since Humana did warn about the challenges that their business is facing, the fact that they did scale back some of those expectations. So now withdrawing 2025 earnings target, their 2024 profit forecast, lower than what the Street had been expecting. We certainly are seeing the ripple effects, not only in Humana stock but also a number of the larger insurers as well.