UnitedHealth Group (UnitedHealth) announced on Tuesday (July 29) that its profit for the second quarter (April-June) was disappointing. The surge in medical costs exceeded the company’s expectations when setting insurance pricing, continuing to put pressure on its performance, leading to a conservative outlook for 2025.
At the beginning of 2025, the company had anticipated earnings per share of $30, but in May, it withdrew its earlier forecast, now expecting adjusted earnings for 2025 to be at least $16 per share.
According to data from FactSet, analysts predict the company’s full-year earnings per share to be $20.64.
In April, the company unexpectedly lowered its forecast, causing its stock price to drop by $130, marking the worst single-day performance in over 25 years with a decline of over 22% for the day.
The newly appointed CEO, Stephen Hemsley, detailed the second-quarter performance in June, promising a “prudent” earnings outlook for 2025. He mentioned that despite underestimating medical activities and cost trends, improvements are underway.
In the second quarter, the company’s adjusted earnings per share were $4.08 with total revenue of $111.6 billion. Analysts had expected earnings per share of $4.48 and revenue of $111.5 billion, according to FactSet.
The company’s profit declined by 19% to $3.41 billion, despite a 13% increase in revenue. Medical costs, as the company’s largest operating expense, surged by 20% to $78.6 billion this quarter.
UnitedHealth Group usually is the first insurance company to report earnings each quarter, but this summer, following competitors like Elevance Health Inc. and Centene Corp., the company lowered its annual forecast and disclosed disappointing performance.
Several insurance companies have indicated that the growth rate of medical costs has surpassed expectations, with an increase in emergency room visits, rising prescription drug costs, especially in cancer and gene therapy treatments.
Behavioral health care is also on the rise, including treatments for mental health and substance use disorders.
UnitedHealth Group’s stock price dropped by about 3% to $272.30 before market open on Tuesday.
The company’s stock price had reached a record high of $630 in November last year. However, since December, the stock has seen a significant decline following the fatal shooting of Brian Thompson, CEO of its subsidiary UnitedHealthcare, during the company’s annual investor conference in Midtown Manhattan.
The company’s stock price has plummeted by 44% so far this year.
(Reference: Associated Press)