Humana Inc reported second-quarter results on Wednesday that exceeded analyst expectations, with medical costs coming in as anticipated. The company also reaffirmed its 2026 adjusted earnings per share forecast of at least $9.

Chief Financial Officer Celeste Mellet attributed the stronger-than-expected performance to robust results from both the insurance segment and the CenterWell healthcare services division. Trends in medical and pharmacy costs were in line with projections for both new and existing members. She noted a "slight benefit" in inpatient medical costs, particularly for members receiving care from value-based healthcare providers.

Despite these positive results, Cantor Fitzgerald analysts described the company's unchanged profit outlook as "disappointing" in a Wednesday report, especially following recent beats and guidance upgrades from other insurers. Investor expectations for the sector have been elevated, as several companies have raised their forecasts and demonstrated better control over rising medical costs within Medicare Advantage plans—a challenge that has weighed on the industry for over two years.

Humana shares fell more than 6% in afternoon trading, despite the solid quarterly performance. The company is one of the largest providers of Medicare Advantage plans, serving individuals aged 65 and older, as well as those with disabilities.

Here is how the second-quarter results compared with Wall Street expectations, based on an LSEG survey of analysts:

Adjusted earnings per share: $7.61, versus the expected $7.22

Revenue: $40.87 billion, versus the expected $40.61 billion

For the second quarter, Humana reported net income of $694 million, or $5.73 per share, up from $545 million, or $4.51 per share, in the same period last year. After adjusting for items such as amortization and impairments, adjusted earnings per share came in at $7.61.

Revenue increased to $40.87 billion from $32.39 billion a year earlier. Quarterly sales for both the insurance business and the CenterWell segment exceeded analyst expectations.

Insurers, particularly those operating Medicare Advantage plans, have been under pressure from a surge in pent-up demand for medical services following the pandemic and the high cost of specialty drugs.

Humana's medical benefit ratio for the second quarter—the percentage of total medical costs relative to premiums collected—was 91.2%, meeting analyst expectations. Mellet stated that this figure also aligned with the company's internal forecasts for both new and existing members during the quarter. "This is a combined result of stabilizing medical cost trends and the actions we are taking to improve the health outcomes of our members and patients," she said. However, the ratio was slightly higher than the 89.9% recorded in the same quarter last year. A lower ratio typically indicates that the company is collecting more in premiums than it is paying out in benefits, signaling stronger profitability.

Mellet described the outlook for medical costs next year as "fairly stable," but noted that pharmacy cost trends remain "still high" due to drug pricing and new product launches. She expects these costs to be slightly higher next year than in 2026, attributing this to a broader issue of drug pricing rather than an increase in member demand.

Mellet also stated that Humana expects adjustments to its Medicare Advantage plans in 2027 to help improve profitability, and the company is on track to achieve a sustainable pre-tax profit margin of at least 3% by 2028. The company remains confident in its ability to drive earnings growth through expanding its membership base, improving the quality ratings of its Medicare Advantage plans, maintaining pricing discipline, and controlling costs.