UnitedHealth Earnings: Margin Improvement Continues in Risk-Taking Operations

Key Morningstar Metrics for UnitedHealth Group

• Fair Value Estimate
  : $475.00
• Morningstar Rating
  : ★★★★
• Morningstar Economic Moat Rating
  : Narrow
• Morningstar Uncertainty Rating
  : High

What We Thought of UnitedHealth Group’s Earnings

On Oct. 13, UnitedHealth Group UNH reported financial results that included roughly flat net revenue and 61% adjusted EPS growth to $4.69, well above FactSet consensus of $4.15. Management also raised 2026 adjusted EPS guidance to at least $20.50 (or at least 25% growth), up from $19.50-$20.00.

Why it matters: Shares were volatile in early trading, but overall, we think investors should appreciate that margin improvement remains the priority over market share at UnitedHealth, especially in its risk-taking operations.

• During the quarter, medical insurance profits grew 49% year over year, as the firm’s medical cost ratio improved 150 basis points to 88.4% and efficiency efforts helped its operating cost ratio improve by about 70 basis points to 12.8%.
• The Optum Health caregiving operations, which also take on risk, delivered an adjusted operating margin improvement to 2.6%, up from 0.2% in the year-ago period. Optum Insight (IT solutions) grew profits 38% on artificial-intelligence-enabled tool growth and margin improvement. Optum Rx (pharmacy benefit management) grew profits a solid 11%.

The bottom line: While we are boosting our near-term expectations on these strong trends, our $475 fair value estimate per share on narrow-moat UnitedHealth has not changed materially. We still view shares as moderately undervalued.

Coming up: UnitedHealth continues to gear up for 2027, with the important Medicare Advantage enrollment period starting on Oct. 15 and the firm giving an initial profit view for 2027 on the call.

• UnitedHealth highlighted star ratings in Medicare Advantage that included over 69% of membership in 4-star or higher-rated plans. This looks like a manageable pullback from 78% in 2026.
• Management gave an initial 2027 outlook that consensus sees as too low, and investors should expect EPS growth to be within its long-term target of 13%-16% off its new 2026 view. Our expectations remain on the high end of the growth target.