Why UnitedHealth Stock Was Pulling Back Today

Shares of UnitedHealth Group (NYSE: UNH) were pulling back Thursday after the company delivered underwhelming fourth-quarter results, as sales were weaker than expected and its costs rose.

As of 1:15 p.m. ET, the stock was down 5.2%.

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UnitedHealth misses the mark

Revenue in the quarter rose by 6.8% to $100.8 billion, which missed the analysts' consensus estimate of $101.7 billion.

In its insurance division, UnitedHealthCare, revenue rose 4.7% to $74.1 billion as it added millions of customers during the year, continuing to expand its base. Revenue from Optum, its division that provides patient care and manages pharmacy benefits, rose 9.4% to $65.1 million. (There are areas of revenue overlap across the divisions.)

UnitedHealth's profit margin fell from 5.8% to 5.5% with declines in both UnitedHealthcare and Optum, and its medical loss ratio -- i.e., the percentage of premiums paid out for patient care -- rose to 87.6%. Management forecast that the ratio will be in the range of 86% to 87% for 2025, while the analysts' average target was 86%.

On the bottom line, the company reported adjusted earnings per share of $6.81, up from $6.18 a year ago, as it benefited from a lower tax rate and adjustments for costs related to a cyberattack. That was slightly better than the consensus estimate of $6.74.

What's next for UnitedHealth

Looking ahead to 2025, UnitedHealth reaffirmed its outlook, calling for revenue of $450 billion to $455 billion, and adjusted earnings per share of $29.50 to $30.

Higher medical expenses and tighter payment policies from the government have put pressure on the earnings of UnitedHealth and its peers, and some legislators in Congress are calling for large pharmacy benefit managers like OptumRx to be broken up.

While UnitedHealth still expects steady growth in 2025, the broad pressure on the healthcare industry remains, and higher loss ratios offer reason for investors to be cautious.

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Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool recommends UnitedHealth Group. The Motley Fool has a disclosure policy.