Health insurance company Humana (NYSE:HUM) met Wall Street’s revenue expectations in Q1 CY2025, with sales up 8.4% year on year to $32.11 billion. The company’s full-year revenue guidance of $127 billion at the midpoint came in 0.7% above analysts’ estimates. Its GAAP profit of $10.30 per share was 3.4% above analysts’ consensus estimates.
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Humana (HUM) Q1 CY2025 Highlights:
Company Overview
With over 80% of its revenue derived from federal government contracts, Humana (NYSE:HUM) provides health insurance plans and healthcare services to approximately 17 million members, with a strong focus on Medicare Advantage plans for seniors.
Sales Growth
A company’s long-term performance is an indicator of its overall quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Luckily, Humana’s sales grew at a solid 12.2% compounded annual growth rate over the last five years. Its growth surpassed the average healthcare company and shows its offerings resonate with customers, a great starting point for our analysis.
We at StockStory place the most emphasis on long-term growth, but within healthcare, a half-decade historical view may miss recent innovations or disruptive industry trends. Humana’s annualized revenue growth of 12.1% over the last two years aligns with its five-year trend, suggesting its demand was predictably strong.
We can dig further into the company’s revenue dynamics by analyzing its number of customers, which reached 14.84 million in the latest quarter. Over the last two years, Humana’s customer base averaged 3.4% year-on-year declines. Because this number is lower than its revenue growth, we can see the average customer spent more money each year on the company’s products and services.
This quarter, Humana grew its revenue by 8.4% year on year, and its $32.11 billion of revenue was in line with Wall Street’s estimates.
Looking ahead, sell-side analysts expect revenue to grow 5% over the next 12 months, a deceleration versus the last two years. This projection is underwhelming and suggests its products and services will see some demand headwinds. At least the company is tracking well in other measures of financial health.
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Operating Margin
Humana was profitable over the last five years but held back by its large cost base. Its average operating margin of 4% was weak for a healthcare business.
Looking at the trend in its profitability, Humana’s operating margin decreased by 3.7 percentage points over the last five years. The company’s two-year trajectory also shows it failed to get its profitability back to the peak as its margin fell by 1.6 percentage points. This performance was poor no matter how you look at it - it shows its expenses were rising and it couldn’t pass those costs onto its customers.
This quarter, Humana generated an operating profit margin of 6.3%, up 2.1 percentage points year on year. This increase was a welcome development and shows it was more efficient.
Earnings Per Share
We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.
Sadly for Humana, its EPS declined by 6.2% annually over the last five years while its revenue grew by 12.2%. This tells us the company became less profitable on a per-share basis as it expanded due to non-fundamental factors such as interest expenses and taxes.
We can take a deeper look into Humana’s earnings to better understand the drivers of its performance. As we mentioned earlier, Humana’s operating margin improved this quarter but declined by 3.7 percentage points over the last five years. This was the most relevant factor (aside from the revenue impact) behind its lower earnings; taxes and interest expenses can also affect EPS but don’t tell us as much about a company’s fundamentals.
In Q1, Humana reported EPS at $10.30, up from $6.11 in the same quarter last year. This print beat analysts’ estimates by 3.4%. Over the next 12 months, Wall Street expects Humana’s full-year EPS of $14.14 to grow 4.1%.
Key Takeaways from Humana’s Q1 Results
It was good to see Humana provide full-year revenue guidance that slightly beat analysts’ expectations. We were also happy its EPS outperformed Wall Street’s estimates. On the other hand, its customer base missed. Overall, this was still a solid quarter. The stock traded up 5.9% to $274.90 immediately following the results.
So should you invest in Humana right now? We think that the latest quarter is just one piece of the longer-term business quality puzzle. Quality, when combined with valuation, can help determine if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free .