Medical Costs Spiral Out of Control, UnitedHealth’s Q2 Earnings Deal Another Blow to Market Confidence
TradingKey - UnitedHealth Group (UNH) reported its second-quarter results (April–June) on Tuesday, July 29, delivering a disappointing earnings performance as soaring medical costs once again outpaced pricing assumptions, dragging down profitability and prompting the company to maintain a cautious outlook for 2025.
The company posted adjusted earnings per share of $4.08, well below the $4.48 expected by analysts. Revenue came in at $111.6 billion, slightly above the $111.5 billion consensus. While revenue rose 13% year-over-year, profits fell 19% to $3.41 billion. Medical costs — the company’s largest expense — surged 20% to $78.6 billion, significantly outpacing premium growth.
At the start of the year, UnitedHealth projected 2025 earnings per share of up to $30, but it withdrew that guidance in May. The company now expects full-year adjusted EPS of at least $16, far below the $20.64 average market estimate compiled by FactSet.
New CEO Stephen Hemsley said the company is taking a “prudent” approach to its 2025 outlook. He acknowledged that UnitedHealth underestimated the pace of medical utilization and cost trends but added that the situation is gradually improving.
As the first major insurer to report quarterly results, UnitedHealth’s performance sets the tone for the sector. This year, it joins peers such as Elevance Health and Centene in lowering annual guidance due to rising medical costs. The industry broadly faces mounting pressure from increased emergency room visits, rising prescription drug costs — particularly for cancer and gene therapies — and growing demand for mental health and substance abuse treatment.
Following the earnings miss, UnitedHealth’s stock dropped 5.1% in pre-market trading to $267.60. Since peaking above $630 in November 2024, the stock has now fallen 44%, weighed down by a series of setbacks — including the fatal shooting of its insurance unit CEO, Brian Thompson, in December, and an ongoing Justice Department investigation into potential Medicare fraud by the company — all of which have eroded investor confidence.
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