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UnitedHealth Group’s Earnings Beat Expectations, But Revenue Falls Short
UnitedHealth Group (UNH), a Dow Jones Industrial Average component, reported fourth-quarter earnings that surpassed forecasts, but revenue came in below expectations. The managed-care and healthcare services giant is navigating a challenging period, marked by intense regulatory and media scrutiny, as well as bipartisan legislative efforts that could impact profitability.
CEO Andrew Witty’s Vision for a “Less Confusing, Less Costly” Healthcare System
Despite the challenges, UNH CEO Andrew Witty remains optimistic, outlining a vision for a more streamlined and cost-effective healthcare system. In response to criticism of prescription benefit management firms, including UnitedHealth’s OptumRx, Witty announced plans to return 100% of rebates from drug companies to customers by 2028, up from 98% currently.
Earnings Estimates and Results
Analysts had expected UnitedHealth earnings per share of $6.73, up 9.2% vs. Q4 2023. Revenue was seen rising 7.6% to $101.595 billion. The medical cost ratio, or spending on medical care as a percentage of premiums, was forecast to rise to 86.1% from 83.2% a year ago.
Actual Results: Adjusted Q4 EPS Rose 10.6% to $6.81 a Share
Revenue grew 6.8% to $100.81 billion, while the medical cost ratio came in at 85.5% for the full year. The increase was attributed to Medicare funding reductions and Medicaid redeterminations, which have tended to cull relatively healthier people from the program.
Outlook: UNH Stands by 2025 Forecast
UnitedHealth reaffirmed its initial 2025 outlook, with a revenue range of $450 billion to $455 billion and adjusted EPS of $29.50 to $30 a share. The company expects to see relatively high costs in 2025, with the medical care ratio up 150 basis points from 2024. On a positive note, management highlighted strong results from annual enrollment periods into health plans, which will serve an extra 1.9 million people this year.
Impact on the Market
UNH stock slid 3.3% to 525.05, making it the biggest Dow Jones loser early Thursday. Other managed care stocks, including Humana (HUM) and Elevance Health (ELV), also fell amid the focus on UNH earnings.
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