UnitedHealth Group's Earnings Miss Sinks Medical ETF 6.5%

The iShares U.S. Medical Services ETF (IHF) experienced a significant decline of 6.5% on Thursday, marking its worst performance since June 11, 2020. This downturn was primarily driven by a sharp drop in the stock prices of several key companies within the sector, including Agilon, UnitedHealth Group, Alignment Healthcare, Humana, Elevance, and CVS Health. Each of these companies saw their stock prices fall by at least 5%.

The decline in the ETF was largely attributed to the disappointing financial results and revised earnings outlook of UnitedHealth Group. The company reported its first-quarter earnings for the 2025 fiscal year, revealing that its earnings per share (EPS) and revenue were slightly below market expectations. UnitedHealth Group reported an EPS of $7.20, which was lower than the anticipated $7.29, and revenue of $109.6 billion. This underperformance, coupled with the company's unexpected reduction in its earnings forecast for the current fiscal year, sent shockwaves through the medical services sector.

UnitedHealth Group cited unexpectedly high Medicare medical costs as the primary reason for its revised earnings outlook. This adjustment was particularly surprising given the company's typically conservative approach to forecasting. The increased medical costs have put significant pressure on the company's financial performance, leading to a substantial drop in its stock price and, consequently, the broader ETF.

The ripple effect of UnitedHealth Group's financial struggles was evident across the medical services sector. Other major players, such as Humana and CVS Health, also experienced significant declines in their stock prices. Humana's stock fell by more than 8%, while CVS Health saw a drop of over 5%. This widespread decline underscores the interconnected nature of the medical services industry and the impact that one company's performance can have on the broader sector.

The downturn in the medical services sector comes at a time when the broader market is already facing headwinds. Recent economic indicators and geopolitical tensions have contributed to a sense of uncertainty, making investors more cautious about their investments. The decline in the iShares U.S. Medical Services ETF is a clear reflection of these broader market dynamics and the specific challenges facing the medical services industry.