Cramer says ‘buy’ as Humana stock slips on UNH’s warning

Humana Inc (NYSE: HUM) lost more than 10% this morning after peer UnitedHealth Group Inc (NYSE: UNH) warned of rising costs.

UNH reports uptick in outpatient procedures

On Wednesday, Tim Noel – the Chief Executive of UnitedHealth Medicare and Retirement said seniors were now opting for non-urgent surgeries they postponed during the pandemic.

Elevated volume of elective surgeries means increased costs for health insurance companies. UNH now expects its medical loss ratio to climb moderately above the guided range of 82.1% to 83.1% this year.

Following this disclosure at the Goldman Sachs healthcare conference, Truist Securities analyst David MacDonald trimmed his price target on this healthcare stock to $580.

Jim Cramer loads up on shares of Humana Inc

It is noteworthy here that other insurers have not yet reported such a change in trend.

Earlier this month, Humana reiterated that it expects to earn at least $28.25 a share this year on an adjusted basis (roughly in line with Street estimates).

According to Jim Cramer, today’s sell-off in “HUM” is overblown since its guidance signals it doesn’t expect an uptick in elective procedures to meaningfully weigh on profitability.

Capitalising on the pullback this morning, his Charitable Trust bought another 15 shares of the health insurance company to bring the total to an even 100. Humana stock currently pays a dividend yield of about 0.8% as well.