(Bloomberg) -- UnitedHealth Group Inc. forecast earnings for 2025 in line with Wall Street’s expectations, signaling that rising medical costs will continue hurting results for the health-care giant.
Adjusted earnings will be $29.50 to $30 a share next year, the company said Tuesday in a statement. Analysts are projecting $29.89 on average, according to a Bloomberg survey.
Costs of patient care in government health programs and stricter federal payment policies have been squeezing profits at UnitedHealth. In October, the company warned investors that the upper end of its initial 2025 adjusted earnings guidance would be around $30 a share, lower than analysts had projected at the time.
The outlook shows a year of slower profit growth than investors have become accustomed to, with per-share adjusted earnings increasing by 7.7% from its current outlook for this year, according to analysts from Stephens. It would be the first time in at least a decade that the company hasn’t posted double-digit growth in the metric, according to data compiled by Bloomberg.
The company’s shares fell less than 1% in trading before US markets opened. They had gained 15% this year through Tuesday’s close.
Typically Conservative
While UnitedHealth typically gives a conservative initial forecast and raises it over the course of the year, that didn’t happen in 2024. At its last quarterly report, the insurer trimmed the top end of its 2024 outlook, which it affirmed in Tuesday’s release.
The company expects 2025 revenues of $450 billion to $455 billion, well ahead of analyst estimates. It also projected higher medical costs than Wall Street’s view in a document posted Wednesday morning.
A closely watched gauge of how much premiums are spen on patient care will be 86% to 87%, higher than the average analyst estimate of about 85%. Investors view a lower number more favorably, since it leaves more money left over for administrative costs and profit.
It’s a sign the largest US health insurer continues to expect pressure from elevated medical costs. Those trends set off a rocky period for the sector starting in 2023, after years of suppressed medical expenses during the Covid-19 pandemic.
Changes to Medicare and Medicaid have also squeezed revenue at health insurers that rely on the taxpayer funded programs for much of their growth. Still, UnitedHealth expects to add as many as 600,000 new members in private Medicare Advantage plans in 2025, a year when some of its peers expect to lose members.
And the company doesn’t see any impediments to its long-term prospects: It affirmed its long-term target to grow earnings per share 13% to 16% annually.
UnitedHealth is hosting an investor conference Wednesday in New York, where executives are expected to offer more detail on the company’s outlook and strategy.
(Updates with additional details starting in seventh paragraph.)
©2024 Bloomberg L.P.
