Louisville’s Humana Inc. just posted its financial results for the second quarter of 2015, and it showed the firm not only boosting revenues and net income, but also exceeding analyst estimates for earnings-per-share. This is newsworthy, as Humana had disappointed on the EPS estimates front for several quarters in a row.
Yet the news, at least in the eyes of Wall Street, was a bit mixed. Humana’s revenues didn’t match analyst expectations, even as they rose versus the same time period in 2014.
First the good news: Humana’s net income for the quarter was $431 million, or $1.67 per share. This bested the $1.63 expected by analysts.
Now the less-good news: Humana’s revenues for the quarter were $13.73 billion, a 12.3 percent increase year-over-year. Unfortunately, analysts had projected $13.79 billion, a slight shortfall.
As a result, investors are slightly negative on Humana today. Its stock is down half a percent, and trading at just over $183.50, even with the good news about the earnings beat. Humana’s down even as other health insurance firms, including Aetna — which announced a deal to purchase Humana earlier this month — are sightly up.
These mixed financial results correlate to mixed news about the firm’s signature Medicare Advantage programs. Humana saw individual Medicare Advantage membership hit more than 2.7 million members as of June 30, a year-over-year increase of 14.8 percent.
Humana attributed this boost to net membership additions associated with the 2015 plan year, specifically HMO offerings.
This noteworthy uptick in individual Medicare Advantage membership was a positive factor in Humana’s increased quarterly revenues. At the same time, Humana’s group Medicare Advantage membership decreased 1.4 percent year-over-year to 473,100 members, reflecting the loss of a large group account. Overall, though, Humana believes its Medicare Advantage business is stabilizing.
In early July, Humana had revised its projected earnings downward for the year, and for the second quarter of 2015. The firm did this in light of what it projected to be higher-than-average medical costs for 2015, in addition to more-than-projected Medicare Advantage admissions. Humana also projected these higher costs onto its 2016 Medicare Advantage bids.
Humana also said its operating results continue to be challenged due to the volatility and increased morbidity rates associated with new memberships related to the Affordable Care Act, saying medical claims associated with the ACA continue to exceed prior expectations for fiscal year 2015.
In a prepared statement, Humana Chief Financial Officer Brian Kane said “while certain operational challenges impacted our second quarter results, we are encouraged by recent progress.”