1 Russell 2000 Stock with Impressive Fundamentals and 2 We Ignore

As the craze of earnings season draws to a close, here’s a look back at some of the most exciting (and some less so) results from Q2. Today, we are looking at health insurance providers stocks, starting with Humana .

Upfront premiums collected by health insurers lead to reliable revenue, but profitability ultimately depends on accurate risk assessments and the ability to control medical costs. Health insurers are also highly sensitive to regulatory changes and economic conditions such as unemployment. Going forward, the industry faces tailwinds from an aging population, increasing demand for personalized healthcare services, and advancements in data analytics to improve cost management. However, continued regulatory scrutiny on pricing practices, the potential for government-led reforms such as expanded public healthcare options, and inflation in medical costs could add volatility to margins. One big debate among investors is the long-term impact of AI and whether it will help underwriting, fraud detection, and claims processing or whether it may wade into ethical grey areas like reinforcing biases and widening disparities in medical care.

The 12 health insurance providers stocks we track reported a satisfactory Q2. As a group, revenues beat analysts’ consensus estimates by 3.5% while next quarter’s revenue guidance was in line.

In light of this news, share prices of the companies have held steady as they are up 4.4% on average since the latest earnings results.

Humana

With over 80% of its revenue derived from federal government contracts, Humana provides health insurance plans and healthcare services to approximately 17 million members, with a strong focus on Medicare Advantage plans for seniors.

Humana reported revenues of $32.39 billion, up 9.6% year on year. This print exceeded analysts’ expectations by 1.7%. Overall, it was a strong quarter for the company with an impressive beat of analysts’ full-year EPS guidance estimates and full-year revenue guidance slightly topping analysts’ expectations.

Interestingly, the stock is up 24.5% since reporting and currently trades at $290.

We think Humana is a good business, but is it a buy today? Read our full report here, it’s free.

Best Q2: CVS Health

With over 9,000 retail pharmacy locations serving as neighborhood health destinations across America, CVS Health operates retail pharmacies, provides pharmacy benefit management services, and offers health insurance through its Aetna subsidiary.

CVS Health reported revenues of $98.92 billion, up 8.4% year on year, outperforming analysts’ expectations by 5.1%. The business had a stunning quarter with a solid beat of analysts’ same-store sales estimates and a beat of analysts’ EPS estimates.

The market seems happy with the results as the stock is up 13.4% since reporting. It currently trades at $70.70.

Is now the time to buy CVS Health? Access our full analysis of the earnings results here, it’s free.

Oscar Health

Founded in 2012 to simplify the notoriously complex American healthcare system, Oscar Health is a technology-focused health insurance company that offers individual and small group health plans through its cloud-native platform.

Oscar Health reported revenues of $2.86 billion, up 29% year on year, falling short of analysts’ expectations by 3.5%. It was a disappointing quarter as it posted a significant miss of analysts’ EPS estimates.

Oscar Health delivered the weakest performance against analyst estimates in the group. Interestingly, the stock is up 10.5% since the results and currently trades at $15.27.

Read our full analysis of Oscar Health’s results here.

Progyny

Pioneering a data-driven approach to family building that has achieved an industry-leading patient satisfaction score of +80, Progyny provides comprehensive fertility and family building benefits solutions to employers, helping employees access quality fertility treatments and support services.

Progyny reported revenues of $332.9 million, up 9.5% year on year. This print beat analysts’ expectations by 3.9%. It was an exceptional quarter as it also recorded an impressive beat of analysts’ sales volume estimates and EBITDA guidance for next quarter exceeding analysts’ expectations.

The stock is down 4.3% since reporting and currently trades at $22.03.

Read our full, actionable report on Progyny here, it’s free.

Cencora

Formerly known as AmerisourceBergen until its 2023 rebranding, Cencora is a global pharmaceutical distribution company that connects manufacturers with healthcare providers while offering logistics, data analytics, and consulting services.

Cencora reported revenues of $80.66 billion, up 8.7% year on year. This result topped analysts’ expectations by 1.1%. It was a satisfactory quarter as it also produced a beat of analysts’ EPS estimates.

The stock is up 3.9% since reporting and currently trades at $303.69.

Read our full, actionable report on Cencora here, it’s free.

Market Update

Thanks to the Fed’s rate hikes in 2022 and 2023, inflation has been on a steady path downward, easing back toward that 2% sweet spot. Fortunately (miraculously to some), all this tightening didn’t send the economy tumbling into a recession, so here we are, cautiously celebrating a soft landing. The cherry on top? Recent rate cuts (half a point in September 2024, a quarter in November) have propped up markets, especially after Trump’s November win lit a fire under major indices and sent them to all-time highs. However, there’s still plenty to ponder — tariffs, corporate tax cuts, and what 2025 might hold for the economy.

What Happened?

A number of stocks fell in the afternoon session after the major indices continued to pull back, with technology stocks accounting for most of the market's largest decliners. A key reason for this trend is that much of the recent market gains were concentrated in the "AI trade," which includes these large technology and semiconductor companies. So this could also mean that some investors are locking in some gains ahead of more definitive feedback from the Fed.

Despite the downturn, some analysts viewed this as an opportunity to own some of the "Core AI winners." Dan Ives of Wedbush Securities commented, "In our view, the tech bull cycle will be well intact for at least another 2-3 years, given the trillions being spent on AI infrastructure/software/chips/power/apps looking ahead. This remains our tech playbook and investor roadmap."Additionally, mixed earnings reports from retailers, such as Target, have added to the market's weakness. Investors are closely monitoring these reports for insights into the broader economic health and the potential impact of new tariffs on inflation.

The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks.

Among others, the following stocks were impacted:

• Health Insurance Providers company Oscar Health fell 8.4%. Is now the time to buy Oscar Health? Access our full analysis report here, it’s free.
• Traditional Fast Food company Krispy Kreme fell 3.5%. Is now the time to buy Krispy Kreme? Access our full analysis report here, it’s free.
• Perishable Food company Beyond Meat fell 3.5%. Is now the time to buy Beyond Meat? Access our full analysis report here, it’s free.
• Medical Devices & Supplies - Diversified company Neogen fell 3.7%. Is now the time to buy Neogen? Access our full analysis report here, it’s free.

Zooming In On Oscar Health (OSCR)

Oscar Health’s shares are extremely volatile and have had 63 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.

The previous big move we wrote about was 5 days ago when the stock gained 7.1% on continued positive momentum as it announced a partnership to launch a new health insurance plan with grocery chain Hy-Vee. The healthcare technology company is partnering with grocery and pharmacy chain Hy-Vee to launch a new employer health insurance plan called “Hy-Vee Health with Oscar.” The plan, which will debut in the Des Moines, Iowa area, utilizes a model known as an Individual Coverage Health Reimbursement Arrangement (ICHRA). This allows employers to provide workers with a set amount of money to purchase their own health insurance, potentially saving businesses 20% to 30% and employees up to $1,000 annually. The partnership is expected to expand Oscar's customer base and strengthen its competitive position.

Adding to the positive momentum, the broader health insurance sector received a boost after news that prominent investors like Warren Buffett's Berkshire Hathaway had taken a new stake in industry giant UnitedHealth, lifting sentiment for peers like Oscar.

Oscar Health is up 14.1% since the beginning of the year, but at $15.47 per share, it is still trading 33.5% below its 52-week high of $23.27 from September 2024. Investors who bought $1,000 worth of Oscar Health’s shares at the IPO in March 2021 would now be looking at an investment worth $444.40.

Today’s young investors won’t have read the timeless lessons in Gorilla Game: Picking Winners In High Technology because it was written more than 20 years ago when Microsoft and Apple were first establishing their supremacy. But if we apply the same principles, then enterprise software stocks leveraging their own generative AI capabilities may well be the Gorillas of the future. So, in that spirit, we are excited to present our Special Free Report on a profitable, fast-growing enterprise software stock that is already riding the automation wave and looking to catch the generative AI next.