Health insurance company Humana (NYSE: HUM) announced better-than-expected revenue in Q2 CY2025, with sales up 9.6% year on year to $32.39 billion. The company’s full-year revenue guidance of $128 billion at the midpoint came in 1% above analysts’ estimates. Its GAAP profit of $4.51 per share was 24% below analysts’ consensus estimates.

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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.

Revenue Growth

Examining a company’s long-term performance can provide clues about its quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Luckily, Humana’s sales grew at a decent 11.8% compounded annual growth rate over the last five years. Its growth was slightly above the average healthcare company and shows its offerings resonate with customers.

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 11.7% over the last two years aligns with its five-year trend, suggesting its demand was stable.

We can better understand 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 4.6% 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 reported year-on-year revenue growth of 9.6%, and its $32.39 billion of revenue exceeded Wall Street’s estimates by 1.7%.

Looking ahead, sell-side analysts expect revenue to grow 4.3% over the next 12 months, a deceleration versus the last two years. This projection is underwhelming and suggests its products and services will face some demand challenges. At least the company is tracking well in other measures of financial health.

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Operating Margin

Operating margin is a key measure of profitability. Think of it as net income - the bottom line - excluding the impact of taxes and interest on debt, which are less connected to business fundamentals.

Humana was profitable over the last five years but held back by its large cost base. Its average operating margin of 3.6% was weak for a healthcare business.

Analyzing the trend in its profitability, Humana’s operating margin decreased by 2.2 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 1.8 percentage points. We still like Humana but would like to see some improvement in the future.

In Q2, Humana generated an operating margin profit margin of 3.4%, in line with the same quarter last year. This indicates the company’s overall cost structure has been relatively stable.

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 13.1% annually over the last five years while its revenue grew by 11.8%. 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.

Diving into the nuances of Humana’s earnings can give us a better understanding of its performance. As we mentioned earlier, Humana’s operating margin was flat this quarter but declined by 2.2 percentage points over the last five years. This was the most relevant factor (aside from the revenue impact) behind its lower earnings; interest expenses and taxes can also affect EPS but don’t tell us as much about a company’s fundamentals.

In Q2, Humana reported EPS at $4.51, down from $5.63 in the same quarter last year. This print missed analysts’ estimates. Over the next 12 months, Wall Street expects Humana’s full-year EPS of $13.02 to grow 12%.

Key Takeaways from Humana’s Q2 Results

It was good to see Humana provide full-year revenue guidance that slightly beat analysts’ expectations. We were also happy its revenue outperformed Wall Street’s estimates. On the other hand, its EPS missed and its customer base fell short of Wall Street’s estimates. Overall, this was a mixed quarter, but it seems expectations were low given some uneven recent performance from peers. The stock traded up 4.8% to $244 immediately after reporting.

Big picture, is Humana a buy here and now? If you’re making that decision, you should consider the bigger picture of valuation, business qualities, as well as the latest earnings. We cover that in our actionable full research report which you can read here, it’s free.