By Josh Nathan-Kazis

Humana stock seems to have slowed its multi-year slide, but its valuation still lies in the doldrums. When the company reports earnings Wednesday morning, investors likely won't focus on the past quarter's performance, but on the forecast for returning the former Wall Street darling to earnings growth.

Humana shares have slid 13% over the past 12 months, and 50% over the past two years. The S&P 500, in comparison, has risen more than 10% over the past 12 months. The insurer's stock price has sunk amid broad challenges to the Medicare Advantage business, the company's main focus.

Across the industry, Medicare Advantage plans have struggled to adapt as seniors have sought more medical care. For Humana in particular, a cut in the quality rating of its largest Medicare Advantage plan has significantly dented expectations for next year's revenue.

In mid-2024, Humana's stock valuation stood at more than 20 times the next 12 months' expected earnings. Since then, it has fallen as low as 12 times earnings before settling at a recent 17 times. This collapse in valuation maps Wall Street's dimming enthusiasm for Medicare Advantage, the federal program that pays private insurers to manage U.S. seniors' healthcare.

Analysts expect Humana to report earnings of $10.07 per share for the first quarter, and revenue of $32.2 billion, according to FactSet. They anticipate an 87.5% medical loss ratio, a key metric tracking the proportion of premiums paid out to cover medical expenses.

Humana has sued the Centers for Medicare and Medicaid Services in an effort to reverse the decision to cut the quality rating of its largest Medicare Advantage plan. CMS has denied an internal appeal.

The company and other Medicare Advantage providers got a boost in early April, when the Trump administration unexpectedly raised the rates it will pay Medicare Advantage plans in 2026, in what amounted to a $25 billion payout.

But later in April, Humana shares fell 13.9% in a two-day selloff after rival Medicare Advantage insurer UnitedHealth Group slashed its 2025 earnings guidance, citing more Medicare Advantage patients seeking medical care than it had expected, among other factors.

Humana has projected non-GAAP earnings of approximately $16.25 per share for the 2025 fiscal year.

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

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April 29, 2025 16:30 ET (20:30 GMT)

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