UnitedHealth Reports Disappointing Q2 Earnings and Cautious 2025 Outlook

UnitedHealth Group Inc. has posted earnings for the second quarter that fell short of market expectations, prompting the company to adopt a conservative outlook for 2025 amid escalating medical costs that are affecting the insurance industry. The health care behemoth disclosed on Tuesday that expenses have surged beyond initial projections when pricing coverage, contributing to ongoing challenges in its financial performance. However, the company anticipates a rebound in earnings growth by 2026.

For 2025, UnitedHealth has revised its earnings forecast, now projecting adjusted earnings of at least $16 per share, a significant drop from earlier estimates of up to $30 per share made at the start of the year. Analysts, as per data from FactSet, now predict that the company will achieve earnings of approximately $20.64 per share for the full year.

Based in Eden Prairie, Minnesota, UnitedHealth operates one of the largest health insurance and pharmacy benefits management businesses in the country. In addition, the company manages a rapidly expanding Optum division that provides care and technology support.

In May, UnitedHealth withdrew its previous earnings projections for 2025 due to higher-than-anticipated medical costs and witnessed a significant leadership change with the abrupt departure of CEO Andrew Witty. He was succeeded by Chairman Stephen Hemsley, who previously led the company as CEO for over a decade until 2017. This leadership transition followed a rare downward revision of the company's forecast in April, which led to a dramatic decline in UnitedHealth shares--dropping $130 in a single day, marking the worst performance for the company in over 25 years.

Hemsley had assured investors in June that a more prudent earnings outlook would be established alongside the release of the second-quarter results. He acknowledged that the company had underestimated both the activity levels and cost trends in care but indicated that improvements were underway.

In the second quarter, UnitedHealth reported adjusted earnings of $4.08 per share on total revenues of $111.6 billion, while analysts had anticipated earnings of $4.48 per share on revenues of $111.5 billion. The company's profit saw a sharp decline of 19% to $3.41 billion, despite a 13% increase in revenue. Medical costs, which represent the company's largest operational expense, surged by 20% to $78.6 billion during the quarter.

Typically the first insurer to announce quarterly earnings, UnitedHealth's recent report follows disappointing results from competitors such as Elevance Health Inc. and Centene Corp., both of which have also lowered their annual forecasts. Several health insurers are grappling with rising medical costs that have outpaced initial expectations, driven by an increase in costly emergency room visits and escalating prescription drug prices, particularly for expensive cancer treatments and gene therapies. The trend also includes heightened demand for behavioral health care services, which encompass treatment for mental health issues and substance use disorders.

Following the earnings report, UnitedHealth's stock experienced a decline of more than 3%, falling to $272.30 before market opening. The shares reached an all-time high of over $630 last November but have largely lost value since December, particularly after the tragic shooting incident involving CEO Brian Thompson in Manhattan. As a result, UnitedHealth's stock has plummeted by 44% year-to-date, while the Dow Jones Industrial Average, which includes UnitedHealth, has risen by 5%.