UnitedHealth Earnings: Weak Start to 2025 Cuts Into Near-Term Outlook

Morningstar’s Metrics for UnitedHealth Group

• Fair Value Estimate: $530.00
• Morningstar Rating: ★★★
• Morningstar Economic Moat Rating: Narrow
• Morningstar Uncertainty Rating: Medium

What We Thought of UnitedHealth Group’s Earnings

Despite 10% revenue growth led by its medical insurer (12%) and PBM (14%), UnitedHealth Group UNH lowered its 2025 guidance after a weak first quarter included only 4% adjusted EPS growth due to surging medical costs.

Why it matters: Management lowered its 2025 outlook due to this weak start to the year, causing shares to fall about 20% in early trading on April 17. The firm pointed to two major factors that cut its 2025 adjusted EPS view to $26.00-$26.50 from $29.50-$30.00.

• First, higher medical costs in its Medicare Advantage business contributed to its weak first-quarter profits. UnitedHealth now expects that elevated utilization to continue hurting its medical insurance profits through 2025.
• Second, its provider, Optum Health, delivered weak results, as new patients chose its value-based care providers after key insurance plans exited certain geographies, creating a situation where UnitedHealth is treating patients at lower rates than it believes is fair for the risk.

The bottom line: We are reducing our near-term expectations for UnitedHealth to reflect this elevated utilization in medical insurance and weak Optum Health-related trends, which cut our fair value estimate 10% to $530 per share. We continue to see shares as about fairly valued.

• Our narrow moat rating on UnitedHealth has not changed, and UnitedHealth remains the strongest managed care organization we cover with significant margin for executional error like we are currently seeing.
• Although we are keeping our Capital Allocation Rating at Exemplary for now, executional errors like these are starting to weigh on our investment assessment.

Bulls say: While the 2025 outlook cut was disappointing, management highlighted initiatives that could help it get back to its annual earnings growth target of 13%-16% in the long run.

• Also, as a US-based and US-focused firm, UnitedHealth looks largely immune to tariffs.