Humana third-quarter earnings and revenue top estimates

Investing.com -- Humana (NYSE:HUM) has reported third-quarter profit and revenue that topped estimates, in a positive development for the health insurance group following recent setbacks.

Earlier this month, the stock fell after the US government released the results of its quality ratings for 2025 Medicare health and prescription drug plans.

The numbers showed that 25% of Humana's members had signed up for plans that had ratings of 4 stars or above in 2025 -- down from 94% in the prior year. Much of this decrease was due to the rating of Humana's H5216 contract being lowered to 3.5 stars from 4.5 stars, the company has said.

Humana has flagged the decline will impact its quality bonus payments in 2026. The Centers for Medicare and Medicaid typically awards a quality bonus to health plans that achieve 4 stars or higher.

Analysts have suggested that litigation could now be in Humana's future as it attempts to overturn some of the results of the ratings.

Humana has said it is taking steps to "mitigate" the anticipated impact to its 2026 revenue, although it has noted that the ratings decline is not expected to effect its financial outlook for the current year or 2025.

On Wednesday, the firm raised its forecast for 2024 individual Medicare Advantage annual membership growth by about 5% to approximately 265,000. It also lifted its full-year adjusted earnings per-share guidance to "at least" $16, up from its prior outlook of "approximately" $16.

In the quarter ended on Sept. 30, adjusted income per share of $4.16 came in well above consensus projections of $3.35, while revenue of $29.40 billion also beat expectations. In prepared remarks, Humana executives said the returns were driven by slightly higher than anticipated individual Medicare Advantage membership and outperformance at its CenterWell primary care centers.

"Proactive anticipation" of higher industry costs -- which have stemmed in part from more people choosing to undergo elective surgeries delayed by the COVID-19 pandemic -- underpinned results as well, the executives said.

Shares in Humana rose in early US trading.