UnitedHealth Group lowers 2025 earnings outlook on higher medical costs

NEW YORK - UnitedHealth Group (NYSE:UNH), a prominent player in the Healthcare Providers & Services industry with a market capitalization of $256 billion, lowered its full-year 2025 earnings forecast on Tuesday, citing higher-than-expected medical costs and Medicare funding reductions as key factors affecting performance. According to InvestingPro data, 10 analysts have recently revised their earnings estimates downward for the upcoming period, reflecting growing concerns about the company’s near-term outlook.

The healthcare giant now expects adjusted earnings of at least $16.00 per share for 2025, down from its previous outlook which was suspended in May. The company projects revenue between $445.5 billion and $448.0 billion for the year. Despite recent challenges, InvestingPro analysis indicates the stock is currently trading at an attractive P/E ratio of 11.6, suggesting potential value opportunity for investors looking at the company’s long-term prospects.

UnitedHealth reported second-quarter earnings of $3.74 per share, with adjusted earnings of $4.08 per share. Quarterly revenue grew to $111.6 billion, up $12.8 billion from the same period last year.

"UnitedHealth Group has embarked on a rigorous path back to being a high-performing company fully serving the health needs of individuals and society broadly," said Stephen Hemsley, chief executive officer of UnitedHealth Group, in a statement based on the press release.

The company’s medical care ratio, which measures the percentage of premium revenue spent on medical care, increased to 89.4% in the second quarter, up 430 basis points year-over-year. This increase primarily reflected medical cost trends exceeding pricing trends in both unit costs and service intensity, along with ongoing Medicare funding reductions.

UnitedHealth’s UnitedHealthcare segment reported second-quarter operating earnings of $2.1 billion, down from $4.0 billion in the same period last year. Meanwhile, Optum’s operating earnings decreased to $3.1 billion from $3.9 billion a year ago.

The company now expects its full-year 2025 medical cost ratio to be 89.25%, plus or minus 25 basis points.

UnitedHealth indicated it expects to return to earnings growth in 2026 as it strengthens operating disciplines. During the second quarter, the company returned $4.5 billion to shareholders through dividends and share repurchases, and increased its quarterly dividend by 5% to $2.21 per share in June.

In other recent news, UnitedHealth Group has begun cooperating with the U.S. Department of Justice following formal criminal and civil requests concerning its participation in the Medicare program. The company proactively contacted the DOJ after media reports emerged about related investigations and expressed confidence in its practices. Meanwhile, Wolfe Research has lowered its price target for UnitedHealth Group to $330 from $363, citing pressures on the company’s 2025 earnings outlook. The research firm noted challenges in Medicaid and health insurance exchanges, alongside potential increases in selling, general, and administrative expenses. Similarly, Leerink Partners reduced its price target to $340 from $355 while maintaining an Outperform rating, mentioning that investor expectations have been waning as the market awaits the company’s 2025 financial guidance.

In a strategic move, UnitedHealth Group has appointed Mike Cotton as the new CEO of its Medicaid insurance segment, filling a previously vacant position. Additionally, Bobby Hunter will expand his role as CEO of government programs, overseeing both Medicaid and Medicare divisions. These executive changes come amid ongoing scrutiny, as reports indicate the Justice Department is investigating UnitedHealth’s Medicare billing practices. The investigation, ongoing since last summer, examines how the company used medical professionals to gather diagnoses that might have increased Medicare payments.

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