UnitedHealth, one of the largest US healthcare companies, failed to meet second-quarter earnings expectations. It also lowered its full-year outlook, signaling trouble ahead for the industry. The company blamed surging medical expenses for its disappointing performance. Investors had hoped for stronger results, but UnitedHealth reported adjusted earnings of $4.08 per share. This fell short of analysts’ expectations of $4.48. Revenue, however, came in at $111.6 billion, slightly above predictions. Despite the revenue beat, the earnings miss disappointed the market.
The health giant is now projecting adjusted earnings of at least $16 per share for the full year. Earlier in the year, the company had expected up to $30 per share. However, in a shift towards caution, UnitedHealth now expects higher medical costs to persist. Rising medical expenses have hurt other insurers too. UnitedHealth’s medical costs rose 20%, reaching $78.6 billion in the second quarter. This sharp increase was driven by several factors, including more emergency room visits and expensive cancer drugs.
Additionally, gene therapies and behavioral health services have added pressure. More people are seeking care for mental health issues and substance abuse, which increases overall costs. The impact of rising medical costs can be seen across the industry. Competitors like Elevance Health and Centene have also lowered their forecasts recently. Although UnitedHealth usually reports results first, it delayed its update this time.
The company’s leadership has changed as well. Former CEO Andrew Witty left abruptly amid growing cost pressures. He was replaced by longtime executive Stephen Hemsley. Hemsley had previously led the company for over a decade. Under his renewed leadership, the company pledged a more cautious approach. He acknowledged earlier that UnitedHealth underestimated cost trends. However, he promised improvements were underway.
Still, the market reacted negatively. Shares dropped over 3% to around $272. This marks a sharp decline from last year’s high of $630. UnitedHealth’s stock has steadily lost value since late last year. The company continues to operate major businesses, including insurance, pharmacy benefits, and health technology services. However, all areas are facing financial strain from rising medical costs.
In conclusion, UnitedHealth remains a key player in the US healthcare system. But for now, rising medical costs continue to threaten its financial performance.
For more business updates, visit DC Brief.
