- Shares of UnitedHealth are falling from a medical expense ratio above 85% in the third quarter.
- Forecasts for 2025 are not in line with Wall Street expectations.
- The health insurer and care services company beats consensus third-quarter earnings and earnings results.
- Adjusted EPS, revenue up 9% year-over-year.
UnitedHealth Group (UNH) shares, the largest holding company in the world Dow Jones Industrial Average (DJIA)fell 9% on Tuesday after the largest U.S. health insurer reported third-quarter costs that exceeded earlier forecasts.
The health care index, which compares insurance costs with premiums paid, rose to 85.2% in the quarter ending in September. This compares starkly to the year-ago quarter in which UnitedHealth reported a medical coverage rate of 82.3%. Wall Street expected the ratio to reach 84.4% in the third quarter.
After this news, the Dow Jones index fell by half a percentage point, which was contributed to by another report on the company’s results Johnson & Johnson (JNJ). Earnings from a Dow member Goldman Sachs (GS)however, it helped the Wall Street bank rise 3%. The DJIA hit a novel all-time high on Monday.
UnitedHealth Stock Performance News
Despite negative news about rising health care costs, UnitedHealth’s third-quarter results and earnings were impressive. The Minnesota-based insurer, which also has a managed care division, reported adjusted earnings per share (EPS) of 1.7%. Revenue for the quarter also beat the average Wall Street forecast by 1.5%.
UnitedHealth earned $7.15 in adjusted EPS on revenue of $100.8 billion. This represents a 9% YoY raise in both adjusted EPS and revenues.
UNH’s stock price is driven by management’s full-year 2024 forecast of $15.50 to $15.75 in net earnings per share, reflecting the company’s South American burden and the costly cyberattack that hit its Change Healthcare unit. The latter unit costs at least $0.75 per share.
A good signal for shareholders is the decline in the operating expense ratio from 15% a year ago to 13.2% in the quarter.
UnitedHealthcare’s insurance unit reported revenue growth of 7.2% y/y, while health services unit Optum reported 12.6% y/y growth.
Management lowered its full-year adjusted EPS outlook to between $27.50 and $27.75, down from the prior high range of $28.00. However, the 2025 guidance really shocked audiences. Management just reported a round number of $30.00 for 2025 adjusted EPS. Bloomberg data suggests analysts expected something closer to $31.16.
UnitedHealth Stock Forecast
UNH stock broke above its 100-day basic moving average (SMA) on Tuesday. This is a significant event. This means that the market will now consider the 200-day SMA near $525 as the closest support. This level corresponds to the highest range since May in its vicinity.
Long-term support is also emerging at $465 to $480, which has held for most of the first half of the year. The yearly low of $436.38 on April 12 can probably be missed. Health care premiums are manageable and the overall business is extremely robust in terms of turnover.
The market will forget about this earnings report once UNH stock breaks its 50-day SMA, which is currently near $583.
Daily UNH stock chart
