By Josh Nathan-Kazis and Adam Clark

Humana's outlook isn't great, but performance in the fourth quarter was a bit better than expected.

Shares were up after the company reported its financial results early Tuesday morning.

An industrywide increase in medical spending by U.S. seniors over the past year or so has rocked Humana -- which mostly operates Medicare Advantage plans, the government-funded, privately-managed health scheme for older Americans.

Humana stock has fallen roughly 40% since the start of 2023 as of the end of the day on Monday.

The worry heading into Tuesday's earnings release was about medical spending. Cigna and UnitedHealth Group have reported higher-than-expected medical costs in the fourth quarter of 2024, raising concerns that the Medicare Advantage malaise will persist into 2025.

When Humana reported on Tuesday, however, it turned out that the company had fared somewhat better than its peers. The stock was up 1.4% Tuesday morning.

Humana reported an adjusted loss of $2.16 a share for the fourth quarter, better than the FactSet consensus estimate of a loss of $2.21 per share. Revenue for the quarter was $29.2 billion, better than the $28.8 billion consensus estimate.

The adjusted medical-cost ratio across the company -- a vital metric that tracks the proportion of premiums paid out to cover medical expenses -- was 91.3%, in line with the FactSet consensus estimate.

Overall, analysts said the results were good relative to Humana's peers. The quarter was solid, Jefferies analyst David Windley wrote early Tuesday, "when most other peers saw meaningful pressure in [Medicare Advantage]."

Humana's guidance for 2025 was less rosy, but the company had already warned investors not to expect earnings growth this year. According to FactSet, analysts aren't looking for earnings per share to top 2023 levels until 2028.

The company said to expect non-GAAP earnings of approximately $16.25 per share in 2025, roughly in line with its full-year 2024 non-GAAP earnings of $16.21 per share. The FactSet consensus estimate had been $16.71 per share for 2025.

The company said it expects its insurance division's medical cost ratio to be between 90.1% and 90.5%, in line with that division's 2024 ratio of 90.3%. Humana also said it expects individual Medicare Advantage membership to drop 10% in 2025.

In prepared remarks distributed ahead of a Tuesday morning investor call, executives said Humana would focus on expanding its margins in 2025.

Analysts said the guidance was in tune with earlier comments from the company.

"The guide is good enough with no significant negative surprise," Raymond James analyst John Ransom wrote early Tuesday.

When Humana reported its fourth-quarter 2023 earnings in early 2024, the results set off a selloff across managed care -- as investors began to see how seniors had been seeking more care, and insurers had been unable to adjust. Things haven't looked up much since then.

The stock is up 2.4% since President Donald Trump won the 2024 presidential race, while the S&P 500 has risen 4.9%.

This earnings season has been mixed for managed-care stocks. UnitedHealth Group reported a weaker-than-expected fourth quarter for its insurance division in mid-January, raising concern that the Medicare Advantage malaise would persist into 2025. Cigna also fell sharply after its earnings fell short of Wall Street's expectations, as well as management's forecasts, because medical costs were higher than expected.

Elevance, by contrast, reported strong earnings, sending the stock higher as the picture for its Medicaid business seemed to improve.

CVS Health reports its results on Wednesday.

Corrections & Amplifications: Humana reported an adjusted loss of $2.16 a share for the fourth quarter, better than the forecast for a $2.21 loss. A previous version of this article incorrectly stated the forecast was for a $2.12 loss and the reported loss was worse than forecast.

Write to Josh Nathan-Kazis at josh.nathan-kazis@barrons.com

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February 11, 2025 12:05 ET (17:05 GMT)

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