UnitedHealth Group Inc. raised its profit outlook for the year after reporting better-than-expected earnings in the third quarter, a sign of progress in the turnaround of the largest US healthcare conglomerate following a disastrous 2025.
The company expects adjusted earnings per share for the year of at least $20.50, up from a previous range of $19.50 to $20. UnitedHealth raised its guidance for the third time this year after a strong quarter, as medical expenses consumed a smaller share of premium revenue than analysts anticipated, leaving more money for administrative costs and profit.
The quarterly result also benefited from $610 million in favorable reserves, reflecting money set aside for medical claims that ultimately wasn’t needed.
See more: What Happens When Central Banks Get Busy?
“Trend remains elevated but is very stable,” Chief Financial Officer Wayne DeVeydt said in an interview, referring to the pace of healthcare cost growth.
DeVeydt called the target of at least $20.50 a share “a solid run rate on which to grow” during a call with analysts Tuesday. The current analyst view of 2027 earnings may understate the profit opportunity ahead, he said. The company sees initial per share earnings growth for 2027 at the low end of its 13% to 16% target range, he said.
UnitedHealth shares rose 5% in trading Tuesday before New York markets opened. They gained about 15% this year through Monday’s close.
The upbeat report is a bellwether for the industry, as UnitedHealth is the first large conglomerate to release third-quarter results. Health insurers and doctors have been struggling with rising costs and changing government policies that are making it more difficult for Americans to access care.
Third-quarter adjusted earnings per share were $4.69, beating Wall Street analysts’ average estimate. Revenue and operating profit in both the company’s main divisions, the UnitedHealthcare insurance unit and the Optum services arm, topped analysts’ estimates.
UnitedHealth, which runs an insurance business, medical clinics and drug benefit management services, is reorienting its business after it failed last year to accurately predict medical costs, one of its most important functions. The company has been pulling back in Medicare Advantage and turning to private equity for help running some physician offices. More uncertainty awaits the company next year as federal policy changes, such as Medicaid work requirements, go into effect.
The company is shrinking its Optum Health unit, which runs medical clinics, after new government rules squeezed profitability. At the beginning of the year, the company said it would shed about 20% of its clinics, or 550 locations.
Most of that contraction happened in the first half of the year, and the process is on track to be completed by the end of 2026, DeVeydt said. The goal, he said, is for the clinics to be transferred to new owners, rather than closed.
“We have no plans to just close any at this stage,” DeVeydt said.
Operating earnings for Optum Health will exceed $2.2 billion for the year, DeVeydt said. The company had previously said it expected earnings of at least that amount.
UnitedHealth also faces challenges in the coming years in Medicare Advantage, the private version of Medicare, which covers more than half of eligible beneficiaries. UnitedHealthcare, the group’s insurance business, is the largest seller of Medicare Advantage plans. The plans used to be reliable sources of profit for insurers, but that’s changed in recent years as medical costs have risen and the government has increased scrutiny of billing practices it considers improper.
Last week, the federal government downgraded quality ratings on some of UnitedHealthcare’s plans, a setback that could cost the company more than $1 billion in revenue in 2028, according to Wall Street analysts from Evercore ISI and TD Cowen.
Separately, UnitedHealthcare, along with other insurers, has been closing plans and cutting back benefits to preserve profitability. That’s led to a game of hot potato, with insurers trying to attract a profitable mix of members rather than simply maximizing enrollment. Millions of seniors will be looking for new plans for next year.
UnitedHealthcare has shed 935,000 seniors from Medicare Advantage and related programs since the end of 2025. But DeVeydt said enrollment could grow again in 2027.
“Is growth on the table?” he said. “We believe it is.”
A message from Advisor Perspectives and VettaFi: Discover something new! Click here to register for our upcoming webcasts.
Bloomberg News provided this article. For more articles like this please visit
bloomberg.com.
Read more articles by Ike Swetlitz
