UNH is one of the world’s leading healthcare companies, with a market capitalization of ~$240 billion USD.
The company offers insurance services (UnitedHealthcare) and a digital healthcare unit (Optum), covering well over 100 million customers worldwide. Additionally, UNH employs approximately 400,000 people.
Why has the stock price fallen?
UNH has fallen significantly during the year – the stock has dropped from a peak of $625 to $265.
Key reasons:
Adjusted earnings per share for 2Q25 were $4.08, which missed the consensus estimate of $4.48 by 8.9%.
Unexpectedly high medical costs, especially in the Medicare Advantage segment: expenses grew +20% year-on-year, an additional $6.5 billion in costs.
DOJ investigation related to Medicare overbilling and $1.6 billion in potential compensation or fines.
Internal organizational turmoil with the change of CEO to Stephen Hemsley in May 2025, as well as the company’s cyberattack.
Where are the bright spots?
Optum continues strong growth – it has been UNH’s biggest growth engine for years.
Analysts remain confident: 12/15 analysts give a BUY recommendation, and the average target price is $379 (~30% potential from current levels).
Is UNH still a quality and defensive investment, even with risks in the air?
The stock’s steep decline naturally makes one wonder if there’s a buying opportunity. Fundamentally, for me, this is too big, too “old school”, too difficult to understand, and susceptible to politics. I would be very happy to read if someone has the ability to analyze this deeply.
Buffett’s purchases lifted UNH in after-hours trading, but “Big Short” man Michael Burry is also on board. He grabbed call options on about 350,000 shares and directly bought over 20,000 shares.
A pretty clear bet that this will still see an increase, even though the stock has faced headwinds this year.
Now both Buffett and Burry jumped into the same boat – not an everyday sight.
Quite good, although sales-oriented (paid talk, exit pump, etc.?) presentation of the company. Stephanie Niven’s firm has a very small position in UNH, but Stephanie has apparently followed/held the company since 2012-13.
Indeed, when you research this company, unless something completely insane comes from the DOJ, it’s a pretty damn solid business.
UnitedHealth reported strong revenue growth, and EPS also exceeded expectations. The full-year guidance has also been raised, which bodes well for the future.
Different business segments performed well; for example, membership numbers are growing in the insurance sector, and the pharmacy business is performing particularly well. Cost pressures, however, pose challenges, but on the other hand, the company emphasized its readiness for faster growth in the coming years.
According to the article below, UnitedHealth is terminating contracts for approximately one million Medicare Advantage members because tightened reimbursements, rising costs, and stricter oversight have apparently made some of the company’s customers too expensive. This is therefore a strategic withdrawal and not an isolated misstep.
This means that many elderly members now have to look for new insurance and realize how supplementary benefits are diminishing and doctor networks are shrinking. At the same time, this reveals how easily large insurance companies can change the rules of the game to protect their own margins.
The UnitedHealth retrenchment is not just a story about one company, it is a stress test for the entire Medicare Advantage model. For years, private plans have grown on the promise that they could deliver richer benefits at lower cost than traditional Medicare, in part by managing care more tightly. Now, as payment formulas tighten and oversight increases, the trade offs are becoming more visible. The report that describes how UnitedHealth Cuts 1 Million Seniors in the Largest Medicare Purge in 20 Years notes that this is part of a broader period of contraction for the industry, not an isolated blip.
UnitedHealth Sells Banmedica to Patria Investments $PAX
UnitedHealth Group has agreed to sell its last South American business Banmedica to Brazilian private equity group Patria Investments for $1 billion, two sources with knowledge of the matter said on Sunday.
The final agreement was signed on Saturday and an announcement is expected on Monday, the sources added, asking for anonymity to disclose private talks.
UnitedHealth has been trying to exit Latin America since 2022 and had previously sold its businesses in Brazil and Peru.
The sale of Banmedica, which currently operates in Colombia and Chile, has been under discussion for almost a year.
Patria and UnitedHealth did not immediately reply to requests for comment on Sunday. Banmedica had 1.7 million health insurance plan members, seven hospitals and 47 medical centers as of June, after its divestment from Peru.
The exit from the region reduces one more distraction from the turnaround efforts led by CEO Stephen Hemsley. UnitedHealth, a member of the Dow Jones Industrial Average, raised its annual profit forecast in October and said it aims for a return to growth in 2026 that should accelerate in 2027.
Hemsley returned as CEO in May after leading the company from 2006 to 2017 and has been working to regain investor and consumer trust after a difficult period for UnitedHealth that included the murder of a top executive, an unexpected surge in medical costs and a federal probe.
He was brought in as a part of a management shakeup after the company’s first earnings miss in over a decade in April.
UnitedHealth booked an $8.3 billion loss last year related to the sale of its South American operations, $7.1 billion stemming from the Brazil exit and $1.2 billion from Banmedica.
How do those following the company view today’s developments? The US is raising insurance rates for insurance companies, but are they “tacoing” here too?
Below is some background information from Reuters.
Jan 26 (Reuters) - The U.S. has proposed an average rate increase of 0.09% in payments to private insurers next year for the Medicare Advantage plans they manage, the government said on Monday, driving shares of the companies down more than 10%.
Shares of health insurers UnitedHealth (UNH.N), CVS Health (CVS.N) and Humana (HUM.N) were down between 8% and 13% in after-hours trading, while shares of Elevance Health (ELV.N), Centene (CNC.N) and Molina Healthcare (MOH.N) were down nearly 5%.
Trump clearly wants to prevent health insurance premiums from rising. This would naturally impact insurers’ margins. We have seen that margins have been under pressure and are low compared to historical levels. It is hard to say what Trump is ultimately aiming for, but I personally think he will use this as a campaign weapon. It is possible that a better deal might still be reached, but substantial increases are unlikely due to the election. This is a battle he can win, unlike the conquest of Greenland.
Edit: I’ll also add that zero margins are not a sustainable situation. One would think that if prices cannot be raised, they will have to cut some of the population out of insurance coverage or streamline their own operations, e.g., with AI, and lay off staff.
Earnings are out. Met expectations, but the market wasn’t pleased (pre -12%). Perhaps there was something negative in the outlook, no time to look into it right now.
Revenue grew about 12%. Earnings were weak. Guidance is okay imo.
Full Year 2025 Revenues of $447.6 Billion Grew 12% Year-Over-Year; Earnings of $13.23 Per Share; Adjusted Earnings of $16.35 Per Share
Full Year 2026 Revenue Outlook Greater Than $439.0 Billion; Earnings Outlook Greater Than $17.10 Per Share; Adjusted Earnings Greater Than $17.75 Per Share
Looking at the Q4 net profit, it was only $10M in the black. You heard right: UNH had quarterly revenue of $113,215M, or over 113 billion, and only 10 million was left at the bottom line. Looking at the pre-tax profit, it was actually 720 million in the red. No wonder pre-market is showing a significant drop. When you also factor in Trump’s threats, the weakest health insurers are certainly at risk of collapsing if this continues much longer. I’m considering selling my UNH position and looking for a potential new entry point lower down later. I might not necessarily do that, though. It depends on the price…
Insurance companies haven’t managed to grow their customer base for a long time; instead, earnings growth only comes from continuous price hikes. It’s good to see that the tap isn’t open indefinitely. It’s time for the inefficient and unfair US healthcare system to be disrupted.
I’m glad I didn’t give up my UNH position because there’s clearly light at the end of the tunnel now. A few weeks ago, we learned that the rate increases would be higher than expected.
The Trump administration announced a 2.48% payment increase for Medicare Advantage plans for 2027 – a much bigger boost than an earlier proposal that essentially kept rates flat.
UNH reported its earnings today. A massive beat. Because of this, the stock is jumping at the open, and it can now be said with quite a high degree of certainty that the bottom is behind us.
The company brought in revenue of $111.7 billion in the first quarter, up 1.9% from $109.6 billion in the same period a year ago and against a FactSet estimate of $109.4 billion. Adjusted earnings per share came in at $7.23, beating the FactSet consensus of $6.58.
The margin of the bottom-line beat was the widest since the first quarter of 2021, according to FactSet data.
I guess this is also some kind of a positive guidance raise: Expects adjusted earnings per share of at least $18.25 for the year, compared with the $17.75 it guided for last quarter, and the current average analyst estimate compiled by FactSet of $17.86.
I suppose it’s worth just keeping this as a “forever hold” since I managed to pick it up under $300 and the future looks much brighter again. The market wouldn’t have offered such a buying opportunity if everything had been clear and there hadn’t been a hint of uncertainty.
Why has the stock price fallen?
Where are the bright spots?
