UnitedHealth's downbeat annual forecast, quarterly profit miss hit shares
The company projected full-year earnings per share of at least $16, well short of analysts' lowered estimates, while second-quarter profit fell short of expectations.
Its shares were trading about 5% down premarket, set to add to the more than 40% slump this year.
UnitedHealth and other insurers have been hit hard this year by elevated medical costs. The company's underperformance led to the abrupt departure of CEO Andrew Witty in May. New CEO Stephen Hemsley is under pressure to regain investor trust amid company's financial issues and reputational damage.
The company posted its first earnings miss in over a decade in the first quarter and is facing criminal and civil investigation by the U.S. Department of Justice over its Medicare Advantage billing practices.
Morningstar analyst Julie Utterback said given the new outlook is roughly half of UnitedHealth's initial guidance for 2025, investors will be looking at management to allay fears over the longer-term earnings power of the business.
UnitedHealth in December had initially forecast adjusted profit for 2025 to be between $29.50 and $30.00 per share. In 2024, its adjusted profit stood at $27.66 per share.
The company said its new forecast reflects expectations for higher realized and anticipated care trends. The company suspended its 2025 forecast in May, a historic first for the insurer, citing higher-than-anticipated medical expenditures, which have also rattled its peers.
The company's quarterly medical loss ratio - the percentage of premiums spent on medical care - stood at 89.4%, higher than analysts' expectation of 88.58%.
The rise was mainly due to medical cost trends that significantly exceeded pricing trends, and the ongoing effects of Medicare funding reductions, UnitedHealth said.
Still, the company remained optimistic and reiterated that it expects to return to profit growth in 2026.
"While we face challenges across our lines of business, we believe we can resolve these issues and recapture our earnings growth potential," said Tim Noel, chief executive officer of the health insurance unit UnitedHealthcare.
The company's adjusted second-quarter profit of $4.08 per share missed analysts' average estimate of $4.48.
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