Pharma
UnitedHealth Struggles with Additional Costs and Declining Government Payments – Stock Falls Despite Good Quarterly Results
Despite strong sales figures in the third quarter, UnitedHealth is facing unexpected additional costs and declining government payments.
The US health insurer UnitedHealth Group reported a revenue increase of approximately nine percent to over 100 billion USD (92.3 billion EUR) in the third quarter, surpassing analysts' expectations. Adjusted earnings per share rose by about 20 percent to 7.15 USD, also exceeding forecasts. Despite these positive figures, the company revised its full-year profit forecast downwards, significantly impacting the stock at the NYSE.
The net revenue for the year 2024 is now expected to be between 30 and 35 billion euros, adjusted from the originally anticipated range of 30 to 40 billion euros. Additionally, the gross margin has been lowered from 54 to 56 percent to now 51 to 53 percent, which is below market expectations of nearly 54 percent. The operating profit for 2024 is now estimated at approximately 1.2 billion euros, compared to the previous forecasts of around 1 billion euros.
These adjustments are mainly due to unexpected additional costs caused by a cyberattack earlier this year. The attack in February disrupted key payment and data networks used throughout the US healthcare system. This security breach led to higher operating costs and affected the efficiency of services.
Despite these challenges, UnitedHealth was able to exceed expectations in the third quarter thanks to increased revenue and improved profit. However, the lowered forecasts and the increased Medical Loss Ratio (MLR), the percentage of premiums spent on medical services, impacted market sentiment. Analysts from JPMorgan pointed out that the MLR was worse than expected, which could affect profitability in the long term.
The UnitedHealth stock temporarily dropped by 7.24 percent to $561.59 during trading, after reaching a record level the previous day. Since the beginning of the year, however, the stock had shown a growth of 15 percent. The market reaction reflected investors' concerns about the new profit forecasts and additional costs.
Besides internal security issues, UnitedHealth faces external market dynamics affecting the company's outlook. The decrease in government payments and increased operating costs highlight the complex challenges in the healthcare sector. Despite revenue growth and increased profits, the outlook for UnitedHealth remains cautious, as the adjustment of forecasts underscores the balance between growth opportunities and operational risks.
