Humana Inc. (NYSE:HUM) reports slow 3Q earnings amidst rising drug costs


Rising drug costs took a toll on Humana Inc. (NYSE:HUM) as third quarter results came out unimpressive. The health care company reported earnings per share of 1.85 upon revenue of 12.24 billion dollars. A year ago in the same period, the company reported 2.31 earnings per share upon revenue of 10.32 billion dollar. As we can see, the profits have decreased while the revenue has shot up. The market estimate was 2 dollar earnings per share on 12.34 billion dollars in revenue.

Humana Inc. (NYSE:HUM) couldn’t beat the market estimate, falling short of the profits estimates by a large margin while lagging slightly in revenue too, much to the dismay of the investors. The company claimed that the decline of earnings per share came after the rise in prices of specialty prescription drugs, investments in health care exchanges and state based contracts. Expansion of members and improvement in utilization of increasing members for the clinical programs helped a bit in neutralizing these costs.

The company changed its full year earnings per share estimates to 7.40 to 7.60 dollars as compared to the previous 7.75 dollars. The reason behind this is obvious: the losses experienced in this quarter. As far as full year earnings per share are concerned, this lies between 8.50 to 9.00 dollars. The investments in government run exchanges and the price of the new hepatitis C drug Sovaldi is hurting the company. Humana Inc. (NYSE:HUM) is expecting big growth in individual customers, but it’s finding it hard to cope with these rising expenses.

Humana Inc. (NYSE:HUM) will witness rise in its medicare advantage plans for next year, the contract of which lies with the government, to help seniors. That will help the revenue shoot up by 53 billion next year from a projection of 48 to 49 billion this year. Humana Inc. (NYSE:HUM) claimed that it is the only publicly traded health plan to achieve a five star rating for some of its plans, on the government’s relatively new five star scale for insurers with medical care.

Humana Inc. (NYSE:HUM)’s concerns are simple; the rising costs are proving to be too much of an ache. Every health care company thrives on the drugs in the market. But the recent hepatitis C drugs manufactured by these big end pharmaceutical companies is proving to be too much for this health insurance companies to cope with. Other than that, if Humana Inc. (NYSE:HUM) could just improve its earnings per share and quarterly revenue, it would help the company a lot in the longer run.

Also, striking a couple of lucrative contracts with the government would come in handy as well. After all, health insurance companies don’t have many sources to earn from. Let’s just hope that Humana Inc. (NYSE:HUM) manages to reinvigorate its earnings per share and revenue for the next quarter, and that the next year turns out to be better for the company, financially speaking.