Humana, a leading health insurance company, experienced a significant drop in stock prices following its decision to lower its fiscal 2023 earnings forecast. The adjustment was made due to unexpectedly high medical costs.
According to a filing submitted to the Securities and Exchange Commission, Humana now anticipates adjusted earnings of approximately $26.09 per share for fiscal 2023. This figure is notably reduced from their previous estimate of $28.25 per share and falls below analysts' projected earnings of $28.29 per share, as reported by FactSet.
The filing states that the revised forecast is primarily influenced by elevated Medicare Advantage medical cost trends observed in the fourth quarter. The surge in costs is attributed to an unanticipated increase in inpatient utilization.
As a consequence of the adjusted forecast, Humana's stocks experienced an 11% decline during premarket trading on Thursday, reaching a value of $398.
Interestingly, Humana is not the only major health insurer facing escalated costs. Just two weeks prior, UnitedHealth Group disclosed that fourth-quarter patient utilization surpassed expectations, resulting in similar financial challenges. Consequently, UnitedHealth's stocks declined by 2.5% during the premarket session on Thursday.
In conclusion, Humana's decision to reduce its fiscal 2023 earnings forecast has had a significant impact on the company's stock performance. The unexpected surge in medical costs and subsequent decline in projected earnings have raised concerns amongst investors and stakeholders alike.