UnitedHealth Raises Outlook as Earnings Rebound
The health-care company lifted its adjusted earnings forecast to $19.50 to $20.00 a share.
UnitedHealth Group (UNH), the health-care and insurance company, raised its full-year outlook after second-quarter earnings recovered from a year earlier despite renewed pressure on medical costs.
The quarter marked an uneven turn in UnitedHealth’s recovery. Revenue was essentially flat at $112.0 billion after growing 2% in the first quarter, while the business mix continued shifting away from insurance premiums toward services.
Diluted earnings rose to $6.04 a share from $3.74 a year earlier but declined from $6.90 in the first quarter. Adjusted earnings followed the same trajectory, rising from $4.08 a share a year earlier to $6.38, then slipping from $7.23 sequentially.
The medical care ratio climbed to 86.7% from 83.9% in the first quarter, though it improved from 89.4% a year earlier. The current period included $860 million of favorable reserve development, compared with $70 million of unfavorable development a year ago. The operating cost ratio improved sequentially to 12.7% as UnitedHealth continued investing in technology, operations and care delivery.
UnitedHealthcare’s revenue held near year-earlier levels at $86.0 billion, while operating earnings rose 90% to $3.9 billion and its operating margin expanded to 4.6% from 2.4%. Medical enrollment fell by about 1.6 million from a year earlier to 48.5 million, reflecting attrition in commercial plans, Medicaid eligibility changes and the planned Louisiana exit.
Optum revenue declined 2% from a year earlier to $65.7 billion, but operating earnings increased to $4.0 billion and its margin reached 6.2%. Optum Health absorbed a 5% revenue decline and roughly 700,000 fewer value-based-care patients, while stronger profitability at Optum Insight and Optum Rx helped offset that pressure.
UnitedHealth now expects adjusted earnings of $19.50 to $20.00 a share, raising the lower end by $1.25 from its April forecast of more than $18.25. It expects reported earnings of $18.45 to $18.95 a share and more than $25.45 billion in consolidated operating earnings. The company also lowered the midpoint of its projected medical care ratio by 70 basis points to 88.1%.
Operating cash flow rose to $11.1 billion, aided by the timing of a substantial government payment, and UnitedHealth increased its full-year cash-flow forecast to approximately $24 billion. The company plans at least $5 billion of share repurchases, completed the Alegeus acquisition and committed to eliminate or rebate its 2026 profits from individual Affordable Care Act plans, extending the recovery effort beyond earnings into capital returns and changes for members.