MW UnitedHealth's stock dives after a rare revenue miss

By Emily Bary and Tomi Kilgore

The selloff in the healthcare giant's stock would shave more than 150 points off the Dow's price

Shares of UnitedHealth Group Inc. were headed sharply lower in early trading Thursday, after the healthcare giant reported fourth-quarter revenue that came up short of expectations.

The company beat profit expectations however, as it has for at least the past five years, and affirmed its 2025 earnings outlook.

The company $(UNH)$ briefly touched on concerns over rising medical costs and transparency in coverage, as Chief Executive Andrew Witty said the company is focused on making "high-quality, affordable health care more available to more people while making the health system easier to navigate for patients and providers."

The stock sank 4.7% in premarket trading, enough to lead the S&P 500 index's SPX early decliners.

The implied price decline would shave about 156 points of the price of the Dow Jones Industrial Average DJIA. Dow futures (YM00) were down 40 points in recent trading.

Revenue increased 6.8% from a year ago to $100.81 billion, but that was below the FactSet consensus of $101.60 billion, to snap a 17-quarter streak of revenue beats.

Revenue for its Optum, which includes the company's pharmacy-benefit manager business, increased 9.4% to $65.1 billion. The UnitedHealthcare business saw revenue rise 4.7% to $74.1 billion.

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Net income grew to $5.54 billion, or $5.98 a share, from $5.46 billion, or $5.83 a share.

Excluding nonrecurring items, adjusted earnings per share rose to $6.81 from $6.16 and topped the FactSet consensus of $6.73. The company has beat EPS expectations for at least 21 straight quarters according to available FactSet data.

The company still expects to report 2025 revenue of $450 billion to $455 billion and adjusted EPS of $29.50 to $30.00.

UnitedHealth Group Inc.'s fourth-quarter earnings report were the health insurer's most anticipated in years - but for reasons other than the financial numbers.

The company is at a pivotal point following the killing of Brian Thompson, who headed the UnitedHealthcare unit, and there was a public outcry about insurance denials. That prompted Andrew Witty, the chief executive of all of UnitedHealth, to write of a need "to improve how we explain what insurance covers and how decisions are made."

Read: UnitedHealth Group CEO says healthcare needs fixing. Start with these 3 problems in claims and patient costs, experts say.

Additionally, there's growing political pressure on pharmacy-benefit managers, including UnitedHealth's Optum business.

While those factors were not expected to be much of an issue in UnitedHealth's latest numbers published Thursday but they may be factors to monitor later in the morning, when UnitedHealth executives host their earnings call. Specifically, investors should watch for any planned evolution in UnitedHealth's use of artificial intelligence in the claims process, as well as projections for an environment in which both political parties have taken aim at drug "middlemen."

"Any thoughts on PBM reform and other potential regulation floating around D.C. from management would be helpful to us on the outside looking in," Morgan Stanley analyst Erin Wright wrote.

UnitedHealth shares have been pressured recently, falling about 10% since Dec. 4, when Thompson was killed. That outpaces the 3% drop in the S&P 500 index over that span and signals some investor jitters about the future of the business.

Analysts see some upbeat signs in the present day, however. The Optum business seems strong, according to Truist Securities analyst David MacDonald. Trends there "remain brisk, and we expect ongoing revenue/customer growth as the company continues to expand the service offering" and improve its status in value-based care.

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While investors may have plenty of questions for management about whether a new reality is ahead, it's not clear whether the company will wade much into areas beyond the usual - even though it will be management's first public discussion with investors since Thompson's murder, which happened the morning of UnitedHealth's investor day.

"While the company may opt for a slightly different approach to its earnings call to include more information given the abbreviated investor day, we believe management may keep things status quo," UBS analyst AJ Rice wrote.

Morgan Stanley's Wright will be focused on cost trends, noting that the company seems to face low expectations. "We hope to learn more about the latest cost trend levels in each insurance product, notable areas of divergence from expectations, and updated thoughts on how 2025 should play out from a utilization perspective, where we view it already set a sufficiently low bar," she wrote.

The company "has consistently been ahead of the pack in calling out cost headwinds," Wright added.

UnitedHealth's earnings are important for the market not just as a barometer for the healthcare industry but also because of the stock's high price, which gives it more influence on the Dow Jones Industrial Average.

-Emily Bary -Tomi Kilgore

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January 16, 2025 06:44 ET (11:44 GMT)

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