UnitedHealth UNH isn't looking so healthy. And unfortunately for the firm, it doesn't have the best plan.
While the company's revenue came in narrowly above expectations, its profit continued to crater as patients sought out medical care, prompting a bottom-line miss.
Adjusted earnings per share (EPS) were $4.08, while analysts were looking for $4.48, per LSEG.
Patients Seek More Care Than Ever
Its medical care ratio (MCR), a measure of how much it spends on medical expenses relative to its premiums, was a key factor in the miss. In the latest quarter, it was 89.4%, the highest in the company's history.
It now projects that its MCR will be between 89% and 89.5% this year. That is significantly higher than the 85.1% it saw in this period last year.
UnitedHealth was down 4% in the premarket, hitting a five-year low.
Poor Prognosis
UnitedHealth's poor state started after one of its executives was attacked and killed in Manhattan. But if we're really being honest, the company's problems were more structural than a PR disaster.
In recent years, the cost of care has chipped away at the company's profit margins, with no signs of abating. And a series of controversies — including hacks of critical health care information, investigations by federal officials into pricing practices and other factors — have only compounded its problems.
Earlier this year, the company's stock fell 20% in a single day after a rare earnings miss; its first since 2008. At the time, it cut its guidance. In May, after then-CEO Andrew Witty stepped aside, it decided to pull it altogether.
That's one of the consolations of today's report, although it might be falling on deaf ears. The guidance is back, but it isn't what it used to be.
The company said that it now expects to generate $16 per share in annual adjusted earnings. However, that's down from the adjusted 2025 earnings of $26 to $26.50 that it was seeking in April, before it pulled it altogether. And back in January, it put forth $29 to $30 per share.
Even now, you see the impacts as analysts yearning for more. Analysts polled by FactSet hold a current consensus annual adjusted earnings estimate of $20.64. There's a chasm between that $16 and $20.64.
As a result, UNH is the S&P 500 and Dow 30's worst-performing stock, down nearly 50% on the year.
An Insurer Affair
UnitedHealth isn't alone. At the bottom of the index, it's joined by similarly-situated Centene Corporation (CNC) (-57% year to date) and Molina Healthcare (MOH) (-44%). Not far away, Elevance Health (ELV) (-21%) is also struggling.
Compounding its cost troubles, these private insurers are getting hammered due to higher medical costs and lower reimbursements. These issues are seen worsening as policy changes made in the Republican tax and budget bill are seen impacting health insurers that have have concentrated their efforts in the ACA marketplace, Medicare Advantage (MA) or Medicaid managed-care plans; all of which are facing cuts.
However, despite all the fear, uncertainty and doubt stewing in private insurers, some have been willing to take the plunge and buy the dip, even if the road back might be long and windy.
The company says that it expects to returns to earnings growth in 2026.
