Live: United Health Group (UNH) Drops After Q2 Earnings

Live Updates Live Coverage Updates appear automatically as they are published. Investment Shifts: Portfolio Sales Paused, AI and Optum Insight Prioritized (conference call) 10:31 am “We’ve halted portfolio divestitures to focus on maximizing internal performance first.” – Robert Hunter “We’re infusing AI into forecasting, patient engagement, and product development — especially at Optum Insight.” – Dhivya Suryadevara Rather than relying on M&A for growth, UNH is pivoting to AI-driven productivity and next-gen platform development. The Insight unit in particular is getting leadership focus and investment after being underprioritized. Management Process Overhaul Underway 10:22 am “We’ve returned to monthly performance reviews, deeper underwriting scrutiny, and real-time analytics.” – John Rex “We’re making performance reviews more intensive — not just financials, but stakeholder outcomes, operating levers, and trend detection.” – Dan Schumacher This marks a tone reset from prior quarters, with UNH clearly trying to rebuild investor trust after a string of medical cost surprises and execution gaps. More on margin compression (via conference call) 10:11 am To recover margin, UNH is exiting Medicare Advantage plans covering 600,000+ members, particularly PPOs. The company will also reprice or exit select ACA and Medicaid markets, and has warned that negative Medicaid margins are likely in 2026. “We’ve made the difficult decision to exit plans that serve over 600,000 members.” – Tim Noel “We expect negative margins of up to -1.7% in Medicaid next year.” – UNH leadership These decisions mark a major contraction in underperforming portfolios and signal a more defensive stance heading into 2026. Medicaid to Post Losses in 2026 10:08 am “We expect negative margins of -1.0% to -1.7% in Medicaid in 2026.” – UNH leadership “Behavioral health trends are up 20% YoY… there’s a 12–18 month lag in funding catch-up.” This comment signals Medicaid may become a drag on consolidated earnings unless rate relief materializes — a key watch item for Q4 and state-level lobbying efforts. More On Optum Health Execution Miss: $6.6B Below Expectations 10:02 am Optum Health’s earnings for 2025 are now projected to be $6.6 billion below internal expectations. Roughly $3.6B of the shortfall is from the value-based care business, hurt by: More complex new patients with higher morbidity Underperformance in coding risk models (V-28 transition) Poor execution in onboarding and capitation “Value-based care cohorts from 2024–2025 are running negative margins.” – Patrick Conway“We mis-executed the planned efforts to offset V-28 funding cuts.” – Conway Margins in value-based care are expected to remain at just 1% in 2026, down from 5% in 2023. From the conference call 9:57 am Medical Cost Trends Are Surging Across the Board: UnitedHealth revealed that 2025 medical cost trend is now tracking at ~7.5%, up from ~5% expected earlier in the year. This trend acceleration is evident across all business lines — Medicare Advantage, commercial, ACA exchange, and Medicaid — driven by higher service intensity, physician rounding, diagnostic testing, and elevated ER use. Most encounters are intensifying in services and costing more.– Tim Noel“Group fully insured trend is approaching 11%, about 100 bps higher than expected.” – Tim Noel This broad-based inflation in healthcare delivery is the central reason behind UNH’s EPS shortfall and rising MLR. Why UNH Stock Is Down After Earnings 9:55 am Medical Cost Trend Re-Acceleration Full-year 2025 trend revised up to 7.5% from prior ~5% expectation. Medicare Supplement trend now running 11%+, reflecting broad intensity in care and billing. Optum Health Margin Collapse and Execution Miss Optum Health earnings are $6.6B below plan, with fully accountable care margins collapsing to 1%, down from 5% in 2023. Poor B-28 implementation, underpriced risk, and underserved new patients cited. Medicare Advantage and Medicaid Underperforming MA plans priced too low; Group MA in particular is dragging margins. Medicaid expected to post losses in 2026, with 1.7% negative margin guidance. Massive Plan Exits and Portfolio Contraction for 2026 UNH will exit MA plans serving 600,000+ members and drop PPO offerings. ACA and some Medicaid markets may be cut if pricing fails to match morbidity. UNH Slides As Markets Open, But Wall Street Bullish 9:33 am UNH shares are opening down 5.7% following the Q2 earnings miss and cautious margin outlook. However Wall Street maintains its bullish position on United Health Group. Bernstein maintained its Outperform rating and $377 price target on UnitedHealth, citing strong market positioning and a long-term earnings recovery tied to strategy and operating model changes. While Q2 results matter, the firm stresses that investor confidence and clarity on 2025/26 planning are more important than near-term metrics. Key catalyst themes: Reducing uncertainty Medicare Advantage pricing recovery Platform reset at Optum and UHC 2026 EPS growth guidance of ±15% would suggest a return to the 13–16% normalized EPS range. Optum Health Contracts and Margin Reset 9:28 am The Optum unit also experienced margin pressure: Optum Health revenue fell 7% YoY to $25.2B Operating margin dropped from 7.1% → 2.5% Management cited Medicare funding cuts, underpriced contracts, and misaligned risk model assumptions. UnitedHealthcare Hit Hard 8:45 am Operating earnings at UnitedHealthcare fell to $2.1B, down nearly 50% YoY, as the medical cost ratio surged and Medicare Advantage pricing failed to offset rising utilization: Operating margin dropped from 5.4% → 2.4% Medical trend now tracking ~7.5% vs. pricing of just 5% 2026 pricing is expected to reflect nearly 10% trend growth UnitedHealth Group (NYSE: UNH) posted mixed second-quarter results, as topline revenue of $111.6B beat expectations, but adjusted EPS of $4.08 sharply missed analyst estimates of $5.99. The company’s performance was dragged down by a $1.2B charge tied to its individual exchange business and other discrete items. Despite the earnings miss, UNH reinstated full-year guidance and struck a constructive tone on its long-term recovery path. So far in pre-market trading, the stock is down 2.18% as of 8:30 AM EDT. Metric Estimate Actual Result Revenue $111.59B $111.62B Beat Adj. EPS $5.99 $4.08 Miss Net Margin – 3.1% Miss YoY (4.3%) Medical Cost Ratio – 89.4% Unfavorable YoY (+430 bps) Guidance Update: UNH Reinstates Full-Year Outlook After suspending its 2025 forecast in May due to volatility in medical trends, UNH has reinstated its full-year guidance: FY25 Adjusted EPS: At least $16.00 FY25 Revenue: $445.5B–$448.0B Medical Cost Ratio: 89.25% ± 25 bps Operating Margin: 4.8%–5.0% This implies a more stable second half, even though pricing still lags the cost trend in key segments. We’ve embarked on a rigorous path back to being a high-performing company fully serving the health needs of individuals and society… guided by a culture of service and longstanding values CEO Stephen Hemsley emphasized a shift toward cost discipline and long-term structural improvements: The post Live: United Health Group (UNH) Drops After Q2 Earnings appeared first on 24/7 Wall St..