UnitedHealth Group Stock Rises on Earnings. Here’s Why.

UnitedHealth posted better-than-expected third-quarter earnings and hiked its full-year guidance. (Dreamstime)

Key Points

• UnitedHealth posts better-than-expected third-quarter adjusted earnings.
• Revenue rises to $113.2 billion from $100.8 billion a year ago
• UnitedHealth’s medical-loss ratio came in at 89.9%, better than analysts’ calls for 90.7%.

UnitedHealth Group stock rose Tuesday after a slightly better-than-expected quarter for the company’s health insurance division led to a modest earnings beat.

The stock jumped more than 4% in the premarket hours, a surprisingly big jump given the results, which were largely in line with expectations.

It was an indication of Wall Street’s eagerness to see signs of recovery in the stock, which suffered a historic selloff this spring. The stock’s gains, however, largely faded after the market open. Shares opened at $379.92, up 3.8% from Monday’s close, but fell quickly to be roughly flat by 9:40 a.m. Eastern.

UnitedHealth shares were down 28% this year through Monday’s close. The company, perhaps the most important stock in the U.S. healthcare sector, had slashed and then withdrew its guidance earlier this year, before canning its CEO.

Its earnings are set to crater by more than 40% this year, according to consensus estimates.

The stock, however, has climbed 48% since the start of August—thanks in no small part to the disclosure that Berkshire Hathaway had taken a significant stake in the insurer.

The company had also managed expectations for Tuesday’s third-quarter earnings report: In September, the company reaffirmed its July earnings guidance, limiting new investor anxiety around the print.

Tuesday morning, the company reported adjusted earnings of $2.92 per share, better than the $2.80 per share FactSet consensus estimate. Sales were $113.2 billion, slightly better than the $113 billion FactSet consensus estimate.

The most notable element of the results was the medical loss ratio for the quarter, an important metric that tracks proportion of premiums paid out to cover medical expenses. UnitedHealth reported an MLR of 89.9%, better than the 90.7% FactSet consensus estimate. That appeared to push up earnings from operations of UnitedHealth’s insurance division, UnitedHealthcare, to $1.8 billion, surpassing the FactSet consensus estimate of $1.5 billion.

That’s a good sign for the overall business. One big element of the problems that upended UnitedHealth’s performance in recent years—leading to the stock’s disastrous selloff this spring—was a spike in medical costs in the company’s Medicare Advantage division. A better-than-anticipated MLR points to new management getting those costs under control.

At least one analyst, however, was skeptical. In a note early Tuesday, Leerink Partners analyst Whit Mayo wrote that the MLR beat “is probably a better reflection of UNH prudently resetting investor expectations than stabilization of broader [medical] cost trends.”

Investors seem to have taken the lower MLR as a sign that the broader industry might have gotten medical costs under control this quarter. Shares of Humana, a UnitedHealth competitor that is effectively a Medicare Advantage pure-play, were up 1.7% on Tuesday.

UnitedHealth also on Tuesday bumped up the full-year guidance it issued in July, saying it expects adjusted earnings of at least $16.25 a share, up from its prior guidance of at least $16 per share. That shouldn’t be big news for investors: The July guidance had been seen as conservative, and the current FactSet consensus estimate for the full year is earnings of $16.21 per share.

The bigger question now is what expectations the company sets for 2026. UnitedHealth didn’t issue guidance for next year on Tuesday, but the company did offer its seal of approval for current Wall Street sell-side estimates.

“I’m confident we will return to solid earnings growth next year,” said the company’s new CEO, Stephen Hemsley, on a Tuesday investor call. “Current analyst consensus captures a likely stepping-off point for next year.”

UnitedHealth’s full-year 2024 earnings were $27.66 per share. FactSet consensus estimates now have UnitedHealth earnings climbing to $17.59 per share in 2026 from a low of $16.21 this year. The estimate for 2027 is $20.88 per share.

“We intend to balance our earnings growth ambitions in 2026 with investments and actions that will drive higher and sustainable double-digit growth beginning in 2027 and advancing from there,” Hemsley said.

Revenue rose 16% to $87.1 billion at the company’s UnitedHealthcare insurance segment. The metric was flat year over year at Optum Health, at $25.9 billion. OptumRx, the company’s pharmacy-benefits manager, posted revenue of $39.7 billion, up 16% from last year.

This earnings season comes at a complex moment for the insurance industry. Medicare Advantage, the government-funded program for U.S. seniors that has been behind much of the recent trouble for the sector, remains a question mark. Medicaid, meanwhile, is set to undergo significant changes as a result of the One Big Beautiful Bill Act, which could lead to decreased enrollment, and the plans offered on the Affordable Care Act exchanges are set to see their premiums skyrocket as subsidies come to an end.

On the Tuesday investor call, UnitedHealth executives said that average rate increases for the plans UnitedHealthcare offers on the ACA exchanges was 25%.

“Where we are unable to reach agreement on sustainable rates, we are enacting targeted service area reductions,” said Tim Noel, who leads the UnitedHealthcare division.

Write to Josh Nathan-Kazis at josh.nathan-kazis@barrons.com and Mackenzie Tatananni at mackenzie.tatananni@barrons.com