UnitedHealth Group Inc (NYSE: UNH) has reinstated its full-year guidance, but the management’s estimates hardly brought any good news for investors.
UnitedHealth Group is projecting per-share earnings of $16 on up to $448 billion in revenue.
Both figures are well below Wall Street estimates, which had expected earnings of $20.91 per share on $449.16 billion in revenue.
The downbeat guidance has triggered a fresh wave of selling, with UnitedHealth stock extending losses in Tuesday’s premarket session.
Shares are now down more than 55% from their year-to-date high on April 11.
Medical costs remain an overhang on UnitedHealth stock
UnitedHealth chief executive Tim Noel agreed the insurance firm faces challenges but said “we can resolve these issues and recapture our earnings growth potential while ensuring people have access to high-quality affordable health care.”
However, investors should note that his estimate for medical costs – a persistent overhang for UNH shares – still doesn’t signal possible moderation in the second half of 2025.
The healthcare behemoth sees its medical care ratio printing within the range of 89% to 89.5% this year, roughly the same as significantly elevated 89.4% in Q2.
What it suggests is: cost pressures remain entrenched, limiting near-term margin expansion and reinforcing investor concerns about sustained profitability headwinds.
Note that UnitedHealth stock has now plunged to levels not seen even at the peak of the pandemic in early 2020.
UNH shares down despite better-than-expected Q2 revenue
Broader concerns surrounding UnitedHealth shares are making investors ignore the company’s Q2 revenue that topped Street estimates on Tuesday.
UNH generated $111.62 billion in revenue in its second financial quarter – slightly above $111.52 billion that analysts had forecast.
For investors, however, what’s more important is the bottom line. In its recently concluded quarter, the NYSE-listed firm earned $4.08 on a per-share basis, notably below the consensus of $4.48.
That said, UNH stock currently pays a healthy dividend yield of 3.13%, which keeps it somewhat attractive to own, especially at a trimmed valuation at the time of writing.
How to play UnitedHealth after second-quarter earnings?
UnitedHealth remains the largest and, therefore, the most important health insurer in the world, trading at a historically low multiple and pays an attractive dividend as well.
However, its ongoing challenges suggest investors are better off adopting a “wait-and-see” approach – especially since UNH’s Medicare billing practices are currently under investigation.
The Department of Justice (DOJ) probe is concerning for UnitedHealth stock as Medicare business currently makes up nearly one-third of the firm’s overall revenue.
Therefore, reputational damage, revised reimbursement policies, or financial penalties resulting from the investigation could weigh further on UNH shares moving forward.
That said, Wall Street hasn’t thrown in the towel on UnitedHealth Group Inc yet.
Heading into the earnings print today, analysts had a consensus “overweight” rating on the insurance giant with the mean target of about $355, indicating potential upside of well over 30% from current levels.
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