By UnitedHealth Group (UNH) beat fourth-quarter earnings forecasts on Thursday, though revenue fell short and medical costs ran high. UNH stock, a Dow Jones Industrial Average component, slid in early Thursday stock market action.
UnitedHealth, the embattled managed-care and healthcare services giant, is trying to weather a tumultuous period that has seen the assassination of UnitedHealthcare division CEO Brian Thompson, intensive regulator and media scrutiny of its business practices, and bipartisan legislative efforts that could eat into profitability. The outlook is further clouded by expectations the Trump administration and a GOP Congress will try to impose big cuts in federal spending on health care, particularly Medicaid.
However, UnitedHealth CEO Andrew Witty portrayed the company as leading the way to a “less confusing, less costly” health care system. With Congress taking aim at prescription benefit management firms, including UnitedHealth’s OptumRx, for contributing to higher drug costs, Witty announced that the company would return 100% of rebates from drug companies back to its customers by 2028, up from 98% currently. “We’re taking that excuse (for blaming PBMs) off the table.”
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UnitedHealth Earnings
Estimates: Analysts expected UnitedHealth earnings per share of $6.73, up 9.2% vs. Q4 2023. Revenue was seen rising 7.6% to $101.595 billion, according to the FactSet consensus. Forecasts for the medical cost ratio, or spending on medical care as a percentage of premiums, called for a rise to 86.1% from 83.2% a year ago, with the full-year ratio rising to 85.1% vs. 83.2%.
Results: Adjusted Q4 EPS rose 10.6% to $ 6.81 a share. Revenue grew 6.8% to $100.81 billion. The medical cost ratio came in on the high side at 85.5% for the full year. UNH said the increase included Medicare funding reductions and Medicaid redeterminations, which have tended to cull relatively healthier people from the program based on their no longer qualifying based on income.
The earnings beat came as UnitedHealth cut operating costs to 13.2% of sales in 2024 from 14.7% in 2023.
Outlook: UNH stood by its initial 2025 outlook issued on Dec. 3, with a revenue range of $450 billion to $455 billion and adjusted EPS of $29.50 to $30 a share. The FactSet EPS consensus is $29.83.
UnitedHealth still expects to see relatively high costs in 2025, with the medical care ratio up 150 basis points from 2024. On a positive note, management touted strong results from annual enrollment periods into health plans, saying it will serve an extra 1.9 million people this year.
UnitedHealth Stock
UnitedHealth is the biggest Dow Jones loser early Thursday, sliding 3.3% to 525.05. UNH stock had rallied back to its 200-day moving average this week, before the earnings setback.
Other managed care stocks also are lower amid the focus on UNH earnings. Medicare Advantage-focused Humana (HUM) is off 3% and Elevance Health (ELV) slipped 3.1%.
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