On Tuesday, Humana Inc. HUM posted a fourth-quarter adjusted earnings per share loss of $2.16. That’s down from 11 cents a year ago, in line with the consensus and including incremental investments in Stars.

The company reported revenues of $29.19 billion, up 13.5% year-over-year from $25.73 billion, beating the consensus of $28.84 billion.

For 2025, Humana expects its insurance segment's benefit ratio guidance of approximately 90.1-90.5%.

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Cantor Fitzgerald expects a more cautious approach to cost trend assumptions. However, analysts Sarah James and Gabie Ingoglia acknowledge the reasoning behind expecting some moderation.

“We have incremental concerns over outlier assumptions on cost trends though find some logic in the rationale, and we believe the Street may be underestimating the earnings power in turning around the group MA book in ’26 and ’27, which we estimate could represent a $1-2 earnings drag to 2025,” the analysts wrote.

Humana stands out by projecting a slowdown in the 2025 cost trend to the mid-single digits compared to the high-single digits in 2024. This contrasts with UnitedHealth Group Inc UNH, Elevance Health Inc ELV, and Molina Healthcare MOH, which anticipate continued elevated trends from 2024.

Humana attributes the expected slowdown to factors that won't repeat in 2025, such as the impact of the “two-midnight” rule, though it still expects high specialty drug costs. The company also noted stable cost trends from Q3 to Q4 2024, except for seasonal increases in supplemental benefits that drive year-end utilization.

Management plans to aggressively cut costs and AEP results confirm the company’s pricing strategy is working, analysts say. However, the company lost about 30,000 D-SNP members due to redetermination.

Another positive is that the PDP pricing strategy isn't facing issues.

Price Action: Humana stock is up 0.80% at $259.40 at last check Wednesday.

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