Shares of Humana, Inc. (HUM: Quote) dropped nearly 9 percent in extended trade on Monday after the health insurer reported results for the second quarter that missed analysts' expectations. The company also provided earnings guidance for the third quarter, well below Street view, and lowered its earnings guidance for the full-year 2012, while maintaining annual revenue forecast.
Profit for the quarter declined 23 percent as revenue growth and higher membership costs were more than offset by higher operating expenses.
The Louisville, Kentucky-based company reported net income of 356 million or $2.16 per share for the second quarter, lower than $460 million or $2.71 per share in the prior-year quarter.
Results for the latest quarter includes $0.18 per share in expenses associated with litigation settlement and $0.15 per share of prior-year favorable medical claims reserve development, while the year-ago quarter included $0.12 per share of prior-year favorable medical claims reserve development.
On average, 14 analysts polled by Thomson Reuters expected earnings of $2.28 per share for the quarter. Analysts' estimates typically exclude one-time items.
Consolidated revenues for the quarter increased 4.5 percent to $9.70 billion from $9.28 billion in the same quarter last year, but missed fifteen Wall Street analysts' consensus estimate of $9.80 billion.
The revenue growth was attributable to increases in the retail and employer group segments amid average membership growth at the company's individual and group Medicare Advantage plans.
Total premiums grew 3.6 percent to $9.17 billion, and services revenues increased 26.2 percent to $434 million from the prior-year quarter.
Retail Segment's premiums and services revenue grew 16.3 percent, primarily due to 16.5 percent higher Medicare Advantage revenues. Health and well-being services revenues grew 17.7 percent.
Total medical membership in the quarter rose 8.5 percent to 11.94 million, boosted by 18.8 percent growth in retail memberships.
Consolidated operating cost ratio increased 140 basis points to 14.4 percent the prior-year quarter's 13.0 percent.
"Our company's strategy is sound, though we are disappointed by the need to lower our full-year earnings guidance. We believe the steps we are taking to address certain short-term operational challenges will put us back on the path for sustainable earnings growth moving forward," Chairman and CEO Michael McCallister said in a statement.
Looking ahead to the third quarter, the company expects earnings in a range of $2.00 to $2.10 per share, while analysts currently see earnings of $2.55 per share.
For fiscal 2012, Humana lowered its earnings guidance to a range of $6.90 to $7.10 per share from the previous forecast of $7.38 to $7.58, and maintained its revenue outlook in the range of $39.00 billion to $39.5 billion.
Street is currently looking for full-year 2012 earnings of $7.93 on annual revenues of $39.39 billion.
HUM closed Monday's regular trading session at $70.55, up $0.03 or 0.04% on a volume of 1.26 million shares. However, the stock dropped $6.25 or 8.86% in after-hours trading.
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by RTT Staff Writer
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