Healthcare ETFs in Focus as UnitedHealth Rises 4% Post Mixed Q4 Results

Core Insights - UnitedHealth Group's shares increased by 4% following mixed Q4 2025 results, with higher operating costs impacting year-over-year earnings despite growth from expanded domestic membership [1][11] Financial Performance - Q4 adjusted earnings per share (EPS) were $2.11, beating estimates by 1%, while revenues slightly missed consensus expectations; year-over-year earnings declined by 69.1% while revenues increased by 12.3% due to an expansion of over 415,000 domestic members [6][11] - The operating cost ratio worsened year-over-year, primarily due to charges related to employee incentives and funding for the UnitedHealth Foundation [7] Future Outlook - UnitedHealth expects a medical care ratio of 88.8% for 2026, an improvement from 89.1% last year, indicating potential for higher profitability and better cost control [2][11] - Projected revenues for 2026 are expected to exceed $439 billion, reflecting a 2% year-over-year decline due to planned right-sizing; however, the operating cost ratio is anticipated to improve due to disciplined cost management [8] - The company aims for growth across all business segments, with double-digit improvements in UnitedHealthcare and low to high single-digit growth in Optum segments for 2026 [9] Medicaid Business Concerns - A 21% reduction in Medicaid membership is anticipated for 2026, raising concerns about margin pressures due to recent U.S. government funding cuts [3][11] Investment Recommendations - Investors may consider diversified healthcare ETFs with significant exposure to UnitedHealth to capitalize on its positive outlook while mitigating risks associated with its Medicaid business [4] Analyst Reactions - Following the Q4 results, analysts from RBC Capital and UBS maintained their ratings on UnitedHealth but lowered their price targets, reflecting cautious optimism amid the mixed results [12] ETFs to Consider - iShares U.S. Healthcare Providers ETF (IHF) has net assets of $726.3 million, with UnitedHealth accounting for 20.52% of the fund; it has gained 6.7% over the past six months [13] - Vanguard Health Care ETF (VHT) has net assets of $17.3 billion, with UnitedHealth at 4.09%; it has rallied 15.9% over the past six months [14][15] - iShares U.S. Healthcare ETF (IYH) has net assets of $3.52 billion, with UnitedHealth at 4.61%; it has increased by 15.2% over the past six months [16] - Health Care Select Sector SPDR Fund (XLV) has net assets of $40.87 billion, with UnitedHealth at 4.55%; it has surged 15% over the past six months [17][18]