Humana Eyes Growth Amid Medicare Advantage Challenges, Exploring Pharmacy Partnership

Humana, the second-largest Medicare Advantage provider in the U.S., has lowered its full-year earnings outlook despite reporting a 10.9% year-over-year revenue increase to $32.6 billion in Q3 2025. The company attributes near-term challenges to persistent headwinds in the Medicare Advantage market but highlights potential growth drivers, including a prospective pharmacy partnership with entrepreneur Mark Cuban aimed at streamlining the drug supply chain. Humana's CenterWell division, which provides healthcare services including primary care, pharmacy, and home solutions to over 447,000 patients, accounted for 18.9% of total revenue in Q3 and presents significant margin expansion opportunities. The company's strategic focus on inorganic growth is reflected in its recent acquisition of over 100 primary care centers during 2023 and 2024, which enhances top-line growth prospects. Looking ahead, Humana projects substantial margin improvements in its core business, targeting a 200-300 basis point increase in Medicaid pre-tax margins and a 500-700 basis point expansion in group Medicare Advantage margins by 2028. These operational efficiencies and expanding market opportunities are expected to generate higher cash flows and strengthen credit metrics, supporting dividend growth and continued inorganic expansion. The Medicare Advantage market itself is poised for growth, with the Medicare-eligible population enrolled in this segment forecasted to rise by 6% between 2024 and 2030. Analysts remain cautiously optimistic, with a consensus rating of "Moderate Buy" and a mean price target implying approximately 10% upside from current levels. Recent upgrades, such as from Jefferies, emphasize Humana's diversification strategy and robust earnings growth projections through 2027. Humana’s approach underlines a focus on leveraging enterprise operating leverage to boost earnings, alongside strategic investments in healthcare services and pharmacy innovation. These elements collectively signal potential for sustained growth despite near-term market pressures in the Medicare Advantage insurance landscape.