Humana (NYSE: $HUM) Reports Q4 Earnings, Stock Slumps after Profits Warning

Humana Inc. (NYSE: $HUM) is a leading provider of health insurance products. On Thursday, July 25, before markets opened, the company released its Q4 earnings report to a poor reception.

Humana Releases Q4 Earnings

For the fourth quarter, Humana reported a diluted loss per share of $4.42 and an adjusted EPS loss of $0.11. That marked an improvement from the previous year when it reported a diluted loss per share of $0.12. In Q422, the reported adjusted EPS was $1.97.

For the full year, Humana reported a diluted EPS of $20 and an adjusted EPS of $26.09. That represented a decline from the diluted EPS of $22.08 and adjusted EPS of $25.88 reported in Q422.

The company had a net loss of $541 million in the fourth quarter, much larger than the $15 million net loss reported in the same quarter last year.

For the full year, Humana reported a net income of $2.49 billion, lower than the $2.81 billion net income reported in FY22.

Its reported revenue for the quarter was $26.46 billion, compared to $22.44 billion in revenue reported in the same period last year. The company’s full-year revenue for 2023 was $106.37 billion compared to $92.87 billion reported in FY22.

It had operating cash flow of $3.98 billion at the end of 2023, marking a decline from $4.59 billion reported in FY22.

Segment Performance

Humana’s insurance segment brought in a majority of the revenue for Q4 at $25.57 billion, a nearly $4 billion increase from the $21.60 billion reported in Q422. The insurance segment brought in $102.85 billion in revenue for the whole year, compared to $88.84 billion reported in FY22.

The Centerwell segment brought in $4.71 billion in revenue for Q423, compared to $4.14 billion in Q422. It netted $18.41 billion in revenue for the whole year compared to $17.31 billion netted in FY22.

Humana Issues Gloomy Forecast

Humana issued a diluted EPS forecast of $14.87, a huge decline from the $20 diluted EPS reported in FY23. Its adjusted EPS forecast for 2024 is $16, which marks a huge decrease from the $26.09 reported in FY23.

Humana said the forecast was prompted by rising inpatient costs, which it also blamed on the dismal Q4 performance. It stated that there had been an increase in outpatient surgeries and supplemental benefits in the fourth quarter. Those increases can be attributed to older patients going in for surgeries postponed during the pandemic.

In Q4, the company said there had been a rise in inpatient short stays. At the same time, observation stays were down. The company projects that the issues will persist for a while and could permanently reset its baseline.

Humana Appoints Growth President

Following the Q4 numbers and forecast slump, Humana announced that it was appointing David Dintenfas as President of Enterprise Growth.

Dintenfas will oversee overall growth at the company, focusing on growing customer numbers and ensuring retention. He will take on his new role on February 5, 2024.

Humana believes this position will help it achieve long-term growth in Medicare Advantage. It currently has the second-biggest MA user base after UnitedHealth.

Humana Stock Performance

Following the release of the gloomy forecast, Humana stock plunged by over 10% during late afternoon trading on Thursday, January 25, 2024. HUM stock sunk to lows last seen at the start of the pandemic in 2020. The price of $359.15 per share at the time marked an over 20% decline in the past 12 months.

During early morning trading on Friday, January 26, 2024, HUM stock recovered by 1.35% at $360.17 per share. However, the stock is still down by 27.88% in the past 12 months.

HUM Stock Forecast

Despite the recent slump in performance and the lowered outlook, analysts believe HUM stock is a buy. They have set a board target for the stock, with a high of $597 and a low of $359. Their median target for HUM stock is $430, a 19.43% upside.

Should You Buy HUM Stock?

There is no sugarcoating it: Humana stock is facing a difficult future in the medium term. It is currently underperforming the industry, with the S&P Insurance Select Industry Index rising 10.25% in the same 12-month period that HUM stock lost over 20% of its value.

Costs are likely to keep rising, which the company has acknowledged. Based on its forecast, investors would be wise to wait on the sidelines.

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