By Amina Niasse
NEW YORK, July 16 (Reuters) – UnitedHealth Group on Thursday lifted its 2026 profit forecast, as tighter management of medical costs and improved operating income in its Optum health services business signaled sustained progress in the company’s turnaround efforts.
Shares of the healthcare conglomerate rose nearly 7% before the bell.
Chief Financial Officer Wayne DeVeydt said cost controls in the Medicare health insurance business and higher reimbursements for Medicaid plans for low-income Americans helped the second-quarter results.
“These results are not a reflection of a trend bending or coming under control, but rather our efforts to start pushing down what is already an elevated number,” said DeVeydt.
UnitedHealth CEO Stephen Hemsley, tasked to steer the company back to earnings growth, has refocused the organization and refreshed half of its top leadership, exited some health insurance products, and committed $1.5 billion to invest in artificial intelligence.
Hemsley returned to the helm last year after the health insurance company missed financial estimates and suffered a nationally disruptive ransomware attack, and after a top executive was killed outside its investor meeting.
RESULTS CLEAR HIGH BAR
UnitedHealth now expects 2026 adjusted profit per share of $19.50 to $20.00 compared with its original forecast of at least $17.75. Analysts expect a profit of $18.47 per share for 2026, according to data compiled by LSEG.
J.P.Morgan analyst Lisa Gill said the forecast update cleared the high bar set by investors, who had been looking for a “path” to $20.00.
UnitedHealth’s results lifted shares of other insurers, which were dragged down in Wednesday’s selloff after Elevance’s annual profit hike failed to impress investors.
“We expect the stock and (the) sector to react solidly to results on increased confidence in the turnaround, more than raw increase in earnings estimates,” said Bernstein analyst Lance Wilkes.
Shares of Humana climbed nearly 5%, while those of Centene and smaller rival Oscar Health gained 2% each. Molina’s stock rose nearly 3%.
COST CONTROLS
UnitedHealth reported a second-quarter medical cost ratio – the percentage of premiums spent on medical care – of 86.70%, better than analysts’ average estimate of 88.47% and the year earlier’s 89.4%.
The company said its insurance plan design changes and new pricing on products led to an improvement in the medical cost ratio.
Its health insurance unit, UnitedHealthcare, reported second-quarter revenue of $86 billion, compared with $86.1 billion in the same quarter last year, while overall revenue rose to $112 billion from $111.6 billion. That beat analyst expectations of about $111 billion, according to LSEG.
Higher costs for insurance, however, drove a membership decline, particularly for people purchasing plans through the Obamacare marketplace, where extra pandemic-era government subsidies expired, said DeVeydt.
UnitedHealthcare expects 500,000 people to disenroll from Obamacare plans in 2026, DeVeydt said.
Still, the company has kept its overall revenue outlook for 2026 unchanged at $439 billion, DeVeydt said.
OPTUM IMPROVEMENT
On a yearly basis, second-quarter operating income for Optum jumped 29% to $4 billion, driven by improved operations at its technology segment and better access to care in its clinical unit.
In the previous quarter, Optum’s earnings had dragged as its operating income fell 15% year-over-year to $3.3 billion.
The AI tools the company has introduced this year have reduced the administrative burden and increased the amount of time Optum Health clinicians can spend treating patients, DeVeydt said.
“We said, with Optum Health, this would be a multi-year journey to return to historical growth levels and margins,” said DeVeydt, who expects revenue growth to fully return in 2028. “I would say we are ahead of schedule in year one.”
UnitedHealth this year pulled back on Medicare Advantage offerings for older adults and Optum exited less favorable contracts for coordinated care plans.
The company last year said Optum faced regulatory and cost challenges, representing an $11 billion blow to the unit over three years.
On an adjusted basis, UnitedHealth earned $6.38 per share in the second quarter, compared with an average analyst estimate of $4.90.
(Reporting by Amina Niasse in New York, additional reporting by Sneha S K and Sriparna Roy in Bengaluru; Editing by Caroline Humer, Christopher Cushing and Shinjini Ganguli)
