UnitedHealth Group raised its annual profit forecast on Tuesday and surpassed Wall Street expectations for the first quarter, driven by disciplined cost control and improved government reimbursements for its health insurance operations.
Following the announcement, shares of the healthcare conglomerate climbed nearly 6% in premarket trading.
Read Also – Biogen secures China rights to immune disease therapy in a deal worth up to $850 million with TJ Biopharma
The company now expects 2026 adjusted earnings per share to exceed $18.25, up by 50 cents from its previous forecast of over $17.75 per share. According to data compiled by LSEG, analysts had been anticipating earnings of $17.86 per share for 2026.
On an adjusted basis, the company reported earnings of $7.23 per share in the first quarter, surpassing the average analyst estimate of $6.57 per share, according to data compiled by LSEG, marking a positive surprise of 66 cents per share.
CFO Wayne DeVeydt said the company is focused on maintaining a “prudent” approach to its 2026 outlook, in order to maintain trust and transparency.
“You may say ‘it looks like you beat the quarter by more than that. Why not raise by more?'” said DeVeydt. “We like to believe our execution is the primary driver, but we want to see if any of these trends change in April and May.”
KEEPING COSTS IN CHECK
In January, the healthcare company stated that it expected revenue to decline in 2026 for the first time in decades, marking a setback for CEO Stephen Hemsley’s efforts to restore investor confidence following a challenging period for UnitedHealth Group. The difficulties included the killing of a senior executive, an unexpected rise in medical costs, a federal investigation, and growing public frustration over insurance industry practices.
The healthcare industry has been facing rising costs since mid-2023, driven by a surge in demand for services under government-supported Medicare programs for older adults and individuals with disabilities.
At the same time, shifts in Medicaid enrollment for lower-income Americans have resulted in insurers covering a higher proportion of patients with greater medical needs, further increasing overall expenses for the sector.
UnitedHealth Group reported a first-quarter medical cost ratio the share of premiums spent on medical care of 83.9%, coming in below analysts’ expectations of 85.70%.
“We actually think we’re going to do a little bit better than we anticipated,” said DeVeydt, who said the company expects to lose 1.3 million Medicaid members. “Still losing membership, but retaining a little bit more than we thought.”
OPTUM WEIGHS ON EARNINGS
The company’s Optum health services unit weighed on earnings, as its operating income decreased by 15% to $3.3 billion. The company said this was due to heightened medical costs and ongoing investment it is making to change Optum’s operations.
Revenue at Optum fell 0.2%, as fewer patients enrolled in its coordinated care plans.
The dip in enrollment is intentional, DeVeydt said, as the company exited less favorable contracts. UnitedHealth announced during a fourth-quarter earnings call this year that Optum faced regulatory and cost challenges, representing an $11 billion blow to the unit over a three-year period.
First-quarter revenue at Optum, which provides primary care, was $24.1 billion. Revenue at Optum Rx, UnitedHealth’s pharmacy benefit manager, rose 2% to $35.7 billion.
DeVeydt said Optum changed the way it schedules visits for customers, in an effort to get more people into doctors’ offices, increasing visits by 12% during the first quarter.
The company also invested in deploying Optum professionals into hospitals to help coordinate at-home care, aiming to reduce patient readmissions, which are typically more expensive than discharging patients to nursing facilities.
