UnitedHealth's stock surges as profit beats expectations by widest margin in five years

By Jaimy Lee

Medical-cost ratio - lower is better - fell to a two-year low, even as utilization remained higher than normal

UnitedHealth Group reported a 2% increase in revenue to $111.7 billion in the first quarter of this year (AP Photo/Patrick Sison, File)

UnitedHealth Group's stock surged in Tuesday morning trading after the healthcare giant increased its earnings guidance for the year and revealed unexpectedly strong first-quarter results.

The company had a tough start to the year, disclosing in January that it expected revenue to drop by at least 2% for the year. Its stock tumbled after a lower-than-expected Medicare Advantage rate increase for 2027. (The final rate has come out since then, and it's much higher - 2.48%.)

But UnitedHealth's (UNH) performance in the first quarter points to better days ahead. It said it expects adjusted earnings per share of at least $18.25 for the year, compared with the $17.75 it guided for last quarter, and the current average analyst estimate compiled by FactSet of $17.86.

The company brought in revenue of $111.7 billion in the first quarter, up 1.9% from $109.6 billion in the same period a year ago and against a FactSet estimate of $109.4 billion. Adjusted earnings per share came in at $7.23, beating the FactSet consensus of $6.58.

The margin of the bottom-line beat was the widest since the first quarter of 2021, according to FactSet data. Net income was $6.5 billion - the same as the same quarter last year.

The stock shot up 8.3% at market open. It was the S&P 500 index's SPX biggest gainer.

"While the stock has struggled for much of the past year, it is currently showing signs of a turnaround, or at least stability that investors are appreciating," David Wagner, head of equity at Aptus Capital Advisors, wrote in an email. "The highlight of the report for me was the margins."

UnitedHealth also said its medical-cost ratio - the percentage of health-insurance premiums spent on medical care - was better than expected. It was 83.9% in the first quarter, against a FactSet estimate of 85.5%, and the lowest rate reported in two years. The company cited "strong medical cost management and favorable reserve development," though it noted those gains were impacted by higher-than-normal medical utilization.

Revenue for its Medicare and retirement business increased 1% to $42.1 billion. The higher pricing was partially offset by membership declines, as the number of seniors served through Medicare Advantage dropped by 965,000 during the quarter.

As part of a vast slimming down of its business, which has included selling some medical practices, UnitedHealth also said it completed the sale of Optum UK for $400 million.

It also bought Alegeus Technologies, a privately held provider of consumer-health services, such as health savings accounts and flexible-spending accounts. HSAs, in particular, are increasingly popular and common in the U.S. after a law last year allowed some people who purchase high-deductible Affordable Care Act plans to have them.

At the same time, the number of people in UnitedHealth's Affordable Care Act plans declined 8% year-over-year. There were 7.7 million members on an ACA plan in the first quarter, down from 8.4 million in the first three months of last year.

"The individual ACA business continues to contract," UnitedHealthcare CEO Tim Noel said on the morning's earnings call. "We still expect total membership to decline by approximately one-third in 2026."

UnitedHealth's stock has dropped 24% over the past 12 months, while the S&P 500 has gained 37.8%.

-Jaimy Lee

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04-21-26 0943ET