UnitedHealth Q2 Earnings Miss Estimates on Increasing Medical Costs

Core Insights - UnitedHealth Group Inc. (UNH) reported second-quarter 2025 adjusted earnings per share (EPS) of $4.08, missing the Zacks Consensus Estimate of $4.84, and reflecting a 40% year-over-year decline [1][10] - Revenues increased by 12.9% year over year to $111.6 billion, slightly surpassing the consensus mark by 0.1% [1][10] - The decline in earnings was attributed to elevated medical costs, although this was partially offset by growth in domestic commercial membership and strength in Optum Rx [1][10] Business Performance of UNH - UnitedHealth's second-quarter premium reached $87.9 billion, up from $76.9 billion a year ago, beating the consensus mark by 0.8% [2] Medical Care Ratio and Costs - The medical care ratio (MCR) for the second quarter was 89.4%, worsening by 430 basis points from the previous year and exceeding the Zacks Consensus Estimate of 88.6% [3] - Medical costs rose to $78.6 billion from $65.5 billion a year ago [3][10] - Total operating costs for the second quarter were $106.5 billion, a 17% increase year over year, driven by higher medical costs and cost of products sold [4] Operating Earnings and Margins - Operating earnings declined by 34.6% year over year to $5.2 billion, with the net margin decreasing by 120 basis points to 3.1% [5][10] Performance of Business Platforms - Revenues from UnitedHealthcare, the health benefits segment, increased by 17% year over year to $86.1 billion, driven by domestic commercial membership growth, surpassing the Zacks Consensus Estimate of $84.8 billion [6] - Optum's revenues were $67.2 billion, a 6.8% year-over-year increase, although it fell short of the consensus mark of $67.5 billion [7] Medical Membership - UnitedHealthcare served 50.1 million people as of June 30, 2025, a 2.1% year-over-year growth, but below the Zacks Consensus Estimate of 50.3 million [8] Financial Position - As of June 30, 2025, UnitedHealth had cash and short-term investments of $32 billion, up from $29.1 billion at the end of 2024 [11] - Total assets increased to $308.6 billion from $298.3 billion at the end of 2024 [11] - Long-term debt rose to $73.5 billion from $72.4 billion as of December 31, 2024 [11] Capital Deployment - In the second quarter, UnitedHealth returned $4.5 billion to shareholders through share repurchases and dividends, with a 5% increase in the quarterly dividend rate announced in June [13] 2025 Outlook - Management now projects adjusted net EPS to be at least $16 for 2025, down from a previous range of $26-$26.50, while net earnings are expected to be at least $14.65 billion [14] - Revenues are projected between $445.5 billion and $448 billion for 2025, an increase from $400.3 billion in 2024 [14] - Operating cash flows are now expected to be $16 billion, down from $24.2 billion in 2024 [14]