UnitedHealth Reports Q4 Results, Beats on Earnings but Misses on Revenue

UnitedHealth Group (NYSE: UNH) delivered a mixed set of fourth-quarter results for 2024, with adjusted earnings per share (EPS) surpassing analyst expectations, while revenue fell slightly short. Despite challenges in its Medicare Advantage segment and higher medical care costs, the company reaffirmed its 2025 guidance, highlighting its resilience and growth opportunities.

Earnings and Revenue Performance

UnitedHealth reported adjusted EPS of $6.81 for Q4, exceeding the consensus estimate of $6.72 and marking a significant increase from $6.16 in the prior year. Revenue rose 6.8% year-over-year to $100.8 billion but missed the consensus estimate of $101.76 billion. The earnings outperformance was attributed to improved operating efficiencies and robust growth in the OptumRx segment, while softer results from UnitedHealthcare and OptumHealth weighed on revenue.

CEO Andrew Witty noted that the company remains focused on expanding access to affordable, high-quality healthcare while simplifying the system for patients and providers. This focus, he said, positions UnitedHealth well for growth in 2025.

Key Metrics and Segment Performance

- Medical Care Ratio (MCR): A key profitability metric, the MCR increased to 85.5% for 2024, compared to 83.2% in 2023, driven by Medicare funding reductions, changes in member mix, and Medicaid redeterminations. The higher ratio indicates increased medical costs relative to premiums, which pressured margins.

- Operating Margin: Operating margin for Q4 stood at 7.7%, below the 8.38% estimate, reflecting the impact of elevated medical costs and investments in growth initiatives.

- Cash Flows: Full-year cash flows from operations totaled $24.2 billion, or 1.6 times net income, demonstrating the company’s strong cash generation capabilities.

Segment Highlights

- UnitedHealthcare: Revenue from UnitedHealthcare, the insurance arm, rose 4.7% year-over-year to $74.13 billion, falling short of the $75.38 billion estimate. Domestic enrollment grew by 2.4 million members, but Medicare funding cuts and Medicaid redeterminations weighed on segment performance.

- OptumRx: The pharmacy benefits segment delivered standout growth, with revenue climbing 15% to $35.77 billion, exceeding the $34.9 billion consensus. Increased prescription volumes and expanded service offerings drove the robust performance.

- OptumHealth: Revenue from the health services arm grew 4.6% to $25.66 billion, missing the $26.92 billion estimate. Value-based care patients served increased by 600,000 in 2024, with expectations to add 650,000 more in 2025.

- OptumInsight: Revenue remained flat year-over-year at $4.78 billion, below the $5.09 billion estimate, as demand for healthcare analytics and consulting services faced headwinds.

Recent CMS Developments

The Centers for Medicare & Medicaid Services (CMS) announced issues with January 2025 Medicare enrollment data files, leading to their temporary removal. This has created uncertainty for UnitedHealth and its managed care peers, as investors await updated data expected later in January. The CMS decision underscores potential volatility in Medicare Advantage enrollments, which are a critical growth driver for UnitedHealth and competitors like Elevance Health (ELV), Humana (HUM), and Centene (CNC).

2025 Outlook

UnitedHealth reaffirmed its 2025 guidance, projecting adjusted EPS between $29.50 and $30.00, in line with analyst expectations of $29.86. The company expects revenue of $450 billion to $455 billion, slightly above the consensus of $448.13 billion. Operating cash flow is anticipated to range from $32 billion to $33 billion. UnitedHealth’s outlook reflects confidence in its diversified business model, with growth expected across insurance and Optum segments.

However, challenges such as rising medical costs, Medicare funding constraints, and ongoing regulatory pressures could weigh on profitability. The full-year MCR guidance of 85.5% suggests continued cost pressures, while the operating cost ratio of 13.2% reflects gains from operational efficiencies.

Impact on Peers and the Market

As a key Dow component and a heavyweight in the managed care space, UnitedHealth’s performance has ripple effects across the sector. Shares of peers like CVS Health (CVS), Elevance Health, Humana, and Centene may react in tandem, particularly in light of CMS-related uncertainties. Investors are closely monitoring how UnitedHealth navigates Medicare Advantage challenges relative to its competitors.

Stock Price Reaction

UnitedHealth’s stock fell 3% in premarket trading following the earnings release, reflecting investor concerns about missed revenue expectations, higher medical costs, and softer-than-expected segment performance. Despite these challenges, the reaffirmed guidance and growth in key areas like OptumRx offer reasons for optimism.

Conclusion

UnitedHealth Group’s Q4 results highlight its resilience and growth potential, despite facing headwinds in its Medicare and Medicaid businesses. Strong execution in OptumRx and consistent cash generation underscore the company’s ability to adapt to a complex healthcare environment. With its reaffirmed 2025 guidance and a focus on expanding value-based care, UnitedHealth remains a key player to watch in the managed care space. However, regulatory uncertainties and rising medical costs will require careful navigation to sustain its leadership position. Investors should monitor peers and CMS updates for broader industry implications.