Humana Inc. (HUM) Earnings & Analysis

Latest quarter

Humana reported Q2 FY2026 revenue of $40.9 billion, up 26.2% from Q2 FY2025, and revenue exceeded the consensus of $40.6 billion. The company reported adjusted EPS, as the consensus counts it, of $7.61, above the $6.22 consensus.

The filing shows diluted EPS of $5.73, up 27.1% from $4.51 a year earlier. Humana said consolidated premiums revenue increased $8.1 billion to $38.8 billion, primarily reflecting Medicare membership growth, higher Medicare Advantage and stand-alone prescription-drug-plan premiums, increased Medicare Advantage benchmark funding, and a higher Part D direct subsidy. The filing said consolidated services revenue rose to $1.8 billion as the CenterWell platform expanded its payor-agnostic client base.

Humana reported gross margin of 13.5%, versus 14.9% a year earlier, while operating margin was 3.33%, versus 3.39%. The filing said the consolidated benefit ratio increased to 91.1%, while the consolidated operating cost ratio declined to 9.8%. Humana reported free cash flow of $1.8 billion, compared with $1.2 billion a year earlier.

Adjusted EPS is the figure the consensus estimates, not the GAAP EPS above.

What management said on the call

Chief Executive Officer Jim Rechtin said Humana’s 2026 membership trajectory and both new and returning-member performance were tracking expectations. He said the company’s 2027 Medicare Advantage bids prioritized margin progression needed to remain on track for a sustainable pre-tax margin of at least 3% in 2028. Rechtin said the expected 2027 expansion would draw on clinical-excellence and operating-efficiency work, as well as changes to plan mix and benefits.

Rechtin said Humana remained confident in its path toward top-quartile Bonus Year 2028 STARS results, which the company defines as STARS revenue per member per month 10% above its peer-group median. He said the company had improved faster than its historical compound annual growth rate across 11 of 12 selected HEDIS and patient-safety measures, but said industry thresholds were unknown and Humana could not guarantee the October outcome. He added that key HEDIS metrics were 5% ahead of the prior year’s quality-improvement rate on a per-member basis at the end of Q2.

Chief Financial Officer Celeste Mellet said medical and pharmacy cost trends remained within Humana’s 7% to 8% assumption, with slight favorability concentrated in inpatient care and among members using value-based providers. She said the second-quarter consolidated operating cost ratio declined 120 basis points year over year and that the company continued to expect a full-year reduction of approximately 150 basis points. Rechtin said centralizing operations, expanding outsourcing, improving vendor performance and integrating CarePlus operations had yielded hundreds of millions of dollars in value in the first half.

Analysts asked about 2027 bid margins and plan exits. Mellet said Humana would not quantify the progression from 2026 to 2027 because the result depends on membership size and composition. She said plan exits would prioritize higher-performing plans, including those with more value-based-care penetration, and that the company expects to recapture a significant portion of affected members. Analysts also asked about STARS thresholds; Rechtin said Humana would not share internal threshold estimates and would enter its customary blackout period after receiving CMS plan-preview information.

Guidance

Humana revised its FY2026 GAAP EPS guidance to at least $6.52 from at least $8.36. The company affirmed FY2026 adjusted EPS guidance of at least $9.00. On the call, Mellet said Humana continues to expect its full-year consolidated operating cost ratio to decline by approximately 150 basis points. Humana also said it anticipates 2027 Medicare Advantage plan exits will affect approximately 600,000 members.