UnitedHealth Group Incorporated operates as a diversified health care company in the United States. The company operates through four segments: UnitedHealthcare, Optum Health, Optum Insight, and Optum Rx.
UnitedHealth Group Inc. (UNH) shares have experienced volatility following their latest earnings report, where fourth-quarter results highlighted elevated medical costs and a revenue miss. The stock initially dropped 6.04% after the announcement but regained 4.42% in the subsequent two sessions, reflecting market optimism about its long-term outlook.
UNH reported a medical-loss ratio of 87.6%, higher than analysts’ expectations, signalling increased care costs relative to premiums. This trend is expected to persist, with a 2025 forecast ranging between 86% and 87%. While such figures raise concerns about cost management, UnitedHealth’s executives expressed confidence in their pricing adequacy for the coming year.
Despite the challenges, UNH delivered adjusted earnings of $6.81 per share, exceeding the $6.71 consensus estimate. However, quarterly revenue of $100.8 billion fell short of projections, driven by a 2.5% shortfall in premium revenue. Specialty drug expenses and hospital billing practices were noted as key drivers of the cost pressures.
The broader outlook for UnitedHealth remains positive, particularly within its Optum divisions. Optum Rx plans to pass 100% of drug manufacturer rebates to commercial clients by 2028, positioning itself as a transparent and cost-effective pharmacy benefit manager. Meanwhile, Optum Health continues to expand its value-based care model, focusing on preventive care and home health services.
As a cornerstone of a value-focused portfolio, UNH remains attractive due to its strong fundamentals and long-term growth strategies. The next portfolio rebalance on February 3rd is unlikely to see its removal, as profitability and valuation metrics remain robust.
