UnitedHealth Stock Is Dropping. Inside the Earnings Release Worrying Investors.

UnitedHealth Group stock is down 50% over the past 12 months. ((Courtesy UnitedHealth))

UnitedHealth Group set a new full-year earnings target Tuesday morning that was far below Wall Street expectations, but hints about an improved outlook for 2026 seem to have forestalled a dramatic selloff.

Shares of the embattled managed care giant were down 51% over the past 12 months as of Monday, as the company has shed nearly $270 billion in market value. UnitedHealth withdrew its earlier full-year earnings-per-share guidance of $26 to $26.50 in May, when CEO Andrew Witty departed.

On Tuesday, the new CEO, Stephen Hemsley, announced that the company expects adjusted earnings per share of at least $16 this year.

That’s substantially below Wall Street estimates. The FactSet consensus estimate had been earnings per share of $20.64, while analysts had said in notes that investors were expecting $18 to $20.

The stock was down 5.2% Tuesday morning, a gentle slide relative to recent moves in the stock and the apparent magnitude of the guidance miss.

In notes early Tuesday, analysts said that commentary on 2026 expectations might be more important to investors than the 2025 guidance. The company said in its early morning release that it expects to “return to earnings growth” in 2026.

On a Tuesday morning earnings call filled with acknowledgments of mistakes and underperformance by UnitedHealth executives, Hemsley said that he expected growth to accelerate after 2026.

“Looking to 2026 at this distance, I would expect solid to moderate earnings growth,” Hemsley said. “As we look further ahead, we see our earnings growth strengthening quickly in 2027 and pacing steadily upward over the succeeding years.”

For the second quarter, UnitedHealth reported adjusted earnings per share of $4.08, short of the consensus estimate for $4.48. Revenue was $111.6 billion, just above the consensus estimate for $111.5 billion.

The major cut UnitedHealth has made to its guidance since the start of the year is largely due to pricing errors the company made for its managed-care plans, which underestimated medical costs, the head of the company’s UnitedHealthcare division, Tim Noel, said on the Tuesday analyst call.

“We know these are serious challenges,” said Noel, who replaces Brian Thompson, who was murdered last year. “We are humbled by them, and will carry that sense of humility more deeply into our culture.”

The company now expects a 2025 medical-loss ratio, a closely tracked metric that tracks the proportion of premiums paid out to cover medical costs, of 89.25%. Analysts had been expecting a medical-loss ratio of 88.7%.

Hemsley, on the call, said that growing medical costs, changes in the Medicare program, and other issues had created a “challenging environment” for UnitedHealth.

Referring obliquely to heightened scrutiny of UnitedHealth’s Medicare business, including a federal investigation the company acknowledged last week, Hemsley described a “continuing public controversy over longstanding practices and complexities across the entire healthcare sector.”

Hemsley acknowledged that UnitedHealth had made missteps. “Beyond the environmental factors that are affecting the entire sector…we’ve made pricing and operational mistakes, as well as others,” he said.

The company is running internal reviews, he said, and has brought in outside consultants.

UnitedHealth has weathered selloff after selloff on earnings misses, Medicare Advantage blowups, and a range of other troubles. In May, weeks after the stock fell 27% on news of a guidance cut, the company said it would replace Witty with Hemsley, the board chairman, who previously had the job from 2006 through 2017.

The company pulled its 2025 guidance along with the CEO switch in May, as Hemsley apologized for “the performance setbacks we have encountered from both external and internal challenges.”

UnitedHealth’s scale makes it the most important managed-care company, and perhaps the most important healthcare company, in the U.S. Its insurance business serves 50 million people, it has 90,000 doctors, it owns one of the largest U.S. pharmacy-benefit managers, and UnitedHealth’s software arm touches a significant chunk of all U.S. patient records. Even after the past year’s selloff, it is still one of the six largest healthcare companies in the world by market value.

Write to Josh Nathan-Kazis at josh.nathan-kazis@barrons.com and Elsa Ohlen at elsa.ohlen@barrons.com