Why Humana Stock Is Falling After Earnings Beat Expectations -- Barrons.com

By Catherine Dunn and Mackenzie Tatananni

Humana stock was slumping Wednesday as investors zeroed in on an uptick in medical costs and looked past a second-quarter earnings beat.

The health insurer posted adjusted earnings of $7.61 a share, beating the $7.26 analysts had expected. Humana also reported nearly $40.9 billion in quarterly revenue, up from $32.4 billion a year ago and ahead of calls for $40.6 billion.

The insurer's second-quarter medical cost ratio came to 91.2%, compared with 89.7% a year ago. Analysts were expecting 91.1%. A lower MCR means an insurer spent less on patient medical claims, with these savings dropping to its bottom line as profit.

Humana also reaffirmed, rather than raised, its full-year adjusted earnings guidance on the back of its latest numbers. The company sees earnings of at least $9 a share for the year.

"The first half of the year went well, and we're right where we said we'd be at Investor Day last year," CEO Jim Rechtin said in a statement.

The market wasn't as upbeat. Humana's stock sank 6.5% in Wednesday morning trading -- a sharp contrast to the stock's trajectory this year.

The stock had soared nearly 52% this year, as of Tuesday's close, benefiting from growing investor confidence in managed care companies that serve seniors in the federal Medicare Advantage program.

That set the stage for high expectations heading into the latest earnings report. Given the run in the stock, "we suspect the market was expecting a guidance raise," Raymond James analysts noted early Wednesday, as shares began falling in premarket trading.

Baird analyst Michael Ha said reaffirming guidance was a "prudent" move by Humana, "given lingering uncertainty" about how medical care use among health plan members will play out in the second half of the year. Humana taken on many new members in 2026.

Prior to this year, shares of the large health insurer were pummeled by rising medical costs associated with Medicare. But the sector turned a corner this spring. Insurers delivered solid results in the first quarter, showing Wall Street that costs were becoming more manageable.

Humana's stock gains outpaced those of Medicare Advantage peers UnitedHealth Group, which is up nearly 30% in 2026, and CVS Health, which has gained almost 38% as of Tuesday's close.

Unlike those companies, Humana is much more concentrated in Medicare Advantage, making it effectively a pure play on that market.

Despite Humana's gains, analysts overall are cautious on the stock. Its average rating is a Hold, according to FactSet, with an average target price of $351.79, below Humana's share price of $388.71 at Tuesday's close.

The insurer faces headwinds this year. Humana lost eligibility for certain Medicare bonus payments in 2026 after key health plans failed to achieve a four-star rating from the federal government. Humana executives have said they're working to recover those ratings in time for bonus year 2028.

The federal Medicare agency's upcoming release of star ratings in October should serve as the "next major catalyst" for Humana's stock, Ha wrote Wednesday.

"While today's results reinforce the notion that the underlying business is improving," Ha said in a client note, "we believe the stock is unlikely to move materially higher until investors gain greater confidence around payment year 2028 Star ratings (to be released in October 2026) and longer-term earnings power."

Write to Catherine Dunn at catherine.dunn@dowjones.com

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July 29, 2026 11:57 ET (15:57 GMT)