Shares of Humana (HUM) plummeted 7.41% in early trading on Wednesday, as investors reacted negatively to the health insurer's mixed third-quarter earnings report and lowered full-year guidance. Despite beating analyst expectations for the quarter, concerns about rising medical costs and a reduction in the company's earnings outlook weighed heavily on the stock.

Humana reported adjusted earnings of $3.24 per share for the third quarter, surpassing the consensus estimate of $2.93. Revenue also came in strong at $32.65 billion, exceeding analysts' projections of $32 billion. However, the company's medical-loss ratio, which measures the proportion of premiums paid out to cover medical expenses, rose to 91.1% from 89.9% a year earlier, indicating higher medical costs.

The primary driver of the stock's decline appears to be Humana's decision to lower its full-year GAAP earnings forecast. The company now expects earnings of $12.26 per share for 2025, down significantly from its previous guidance of $13.77 per share. While Humana reaffirmed its adjusted earnings outlook of approximately $17 per share, the cut to GAAP earnings has raised concerns about the company's profitability in the face of rising healthcare expenses. Additionally, Humana updated its forecast for Medicare Advantage membership decline, now anticipating a decrease of about 425,000 members for the year, an improvement from its previous estimate but still a significant reduction that may impact future growth prospects.