Humana Inc. has trimmed its 2026 earnings forecast under standard accounting rules, even as its share price continues to climb on optimism around its Medicare Advantage business. The Louisville-based insurer now expects GAAP diluted earnings per share of at least $8.36 for 2026, down from a prior floor of $8.89. However, the company maintained its adjusted EPS target of at least $9.00, which excludes certain items.
First-quarter results showed revenue rising to $39.65 billion from $32.11 billion a year earlier, while adjusted EPS fell to $10.31 from $11.58. The stock has rallied more than 25% over the past month, trading near $247.12, giving it a market capitalization of roughly $29.7 billion and a price-to-earnings multiple of about 26.4.
The valuation debate has intensified. Some analysts argue the stock's recent surge has outpaced the company's actual earnings recovery trajectory. Fair-value estimates from sources like Simply Wall St peg Humana's intrinsic worth closer to $213, suggesting the current price may be stretched. The stock showed little movement in after-hours trading following the earnings release.
Medicare Advantage remains the central focus. Approximately 80% of Humana's revenue comes from this private alternative to traditional Medicare, a far higher concentration than peers such as CVS Health's Aetna (33%) or UnitedHealth's UnitedHealthcare (12%). The company's first-quarter insurance benefit ratio came in at 89.4%, slightly below its target of just under 90%, but it maintained its full-year guidance of around 92.75% plus or minus 25 basis points.
CEO Jim Rechtin described the quarter as a "solid start to the year," pointing to improvements in quality scores and customer experience. The company noted that early-year medical and pharmacy cost trends were slightly better than anticipated. However, it warned that a gap persists between 2027 Medicare Advantage rates and ongoing medical cost trends.
Managed-care stocks got a boost last month after the Centers for Medicare & Medicaid Services announced a 2.48% increase in 2027 Medicare Advantage payments, representing over $13 billion in additional funding. When factoring in risk-score trends, the effective increase reaches 4.98%. Analysts at Mizuho and Leerink see this as a potential margin expansion opportunity, assuming benefit cuts are implemented.
Yet the risk of benefit reductions looms large. Industry insiders expect Medicare Advantage plans to scale back perks such as dental, vision, hearing, gym memberships, meal delivery, and transportation services next year. Kevin Gade of Bahl & Gaynor noted that Humana is likely to cut back the most aggressively.
Humana's share repurchase activity was modest in the first quarter, with 564,400 shares bought back at an average price of $182.13. As of April 28, the company had $2.72 billion remaining under its buyback authorization, providing flexibility but not signaling an aggressive capital return strategy.
The key risks include higher-than-expected costs from new Medicare Advantage enrollees, failure to improve Star ratings (which determine bonus payments), or member attrition due to benefit cuts. The company's 2026 adjusted EPS forecast already anticipates a year-over-year decline, partly attributable to the drag from Star Ratings.
Looking ahead, investors will focus on 2027 bid submissions, benefit design details, and second-quarter cost trends. These factors will determine whether the stock's recent rally is justified by fundamentals or has outpaced the company's actual earnings recovery.
