UnitedHealth Group NYSE:UNH, a diversified health conglomerate spanning insurance and healthcare services, raised its full-year adjusted earnings outlook after second-quarter profit came in well ahead of Wall Street expectations. The company now expects adjusted earnings of $19.50 to $20 per share this year, up significantly from its previous forecast of more than $18.25 and above analyst estimates. A closely watched measure of medical costs also performed considerably better than analysts had projected, while quarterly profit exceeded the highest estimate in a Bloomberg survey. The stronger results sent UnitedHealth shares up as much as 10.3% in Thursday trading, marking their largest intraday increase since April. Shares of health insurer Humana NYSE:HUM and healthcare company CVS Health NYSE:CVS also advanced following the report.
Chief Financial Officer Wayne DeVeydt said improving medical-cost trends during the first half of the year gave UnitedHealth greater confidence to raise its outlook. He indicated that the updated forecast could provide the starting point for increasing profits next year at the company's historical target rate of 13% to 16% average annual earnings-per-share growth. UnitedHealth has been working to improve insurance profitability by raising premiums, adjusting benefit structures and reducing enrollment in selected plans. Operating margins stabilized during the first quarter and improved in the second, according to Bloomberg Intelligence analyst Glen Losev. Investors may view the report as further evidence that UnitedHealth's financial recovery is gaining momentum after last year's earnings disappointment, leadership changes and broader efforts to rebuild market confidence. The stock had already risen 27% this year through Wednesday's close, significantly outperforming the S&P 500 Index.
However, several cost and enrollment pressures remain. UnitedHealth expects Medicare Advantage membership to decline by 1.1 million by the end of the year as the company adjusts benefits and selectively changes its market participation, although it expects margins in that business to exceed 3% in 2026. Medical costs in commercial health plans are increasing by more than 11%, partly because of a billing-dispute process that insurers say providers are using to raise payment rates. UnitedHealth also continues to lose money in Medicaid, although management said margins are improving. The results may provide some reassurance to healthcare investors after health insurer Elevance Health NYSE:ELV raised its full-year profit guidance only modestly despite favorable quarterly results, while the wider industry continues to face federal policy changes that are pressuring enrollment and profits. UnitedHealth is also using artificial intelligence and ambient-listening tools across Optum Health, which management said has saved physicians 200,000 hours of administrative work that they have redirected toward patient care.