UnitedHealth stock caves 23% as it cuts full-year guidance

UnitedHealth Group (UNH) stock is facing one of the largest sell-offs in its history on Thursday. The stock has lost about 23% at the time of writing near lunchtime in New York, falling from $585 to $450.

While producing a rare miss on both the top and bottom lines in its first-quarter results, the US’ largest private health insurer also cut its outlook for the year.

Its health insurance unit, United Healthcare, paid out a higher level of medical care than expected, and its pharmaceutical unit, Optum Health, dealt with a lower membership base and changes to Medicare reimbursement.

Despite most Dow Jones Industrial Average (DJIA) stocks making gains, the unexpected plunge from UNH stock has pushed the index down 1.3%. The S&P 500 is slightly in the green at the same time.

UnitedHealth Group stock news

In the premarket on Thursday, UnitedHealth reported adjusted earnings per share (EPS) of $7.20 on revenue of $109.58 billion. The EPS missed the Wall Street consensus by 9 cents, while the revenue figure missed by about $2 billion.

This is rare territory for UnitedHealth, which tends to beat and raise its guidance nearly every quarter. Over the past five years, the health insurer has missed its revenue consensus only twice and has not once missed its EPS consensus.

“We are aggressively addressing those challenges to position us well for the years ahead and return to our long-term earnings growth rate target of 13 to 16%,” said CEO Andrew Witty.

Revenue for the health insurance unit came in higher than anticipated, but this was overshadowed by the health expense ratio reaching 84.8% compared to 84.3% in the year-ago period. UnitedHealth has long tried to keep this ratio closer to 82%, but it has risen for six straight quarters. In particular, medical expenses for its Medicare Advantage plans have risen above expectations.

Its OptumHealth and OptumInsight units, however, both missed consensus targets for revenue as both saw revenue fall from a year earlier in a major surprise. 

The company has revised its 2025 adjusted EPS guidance to between $26 and $26.50, down from Wall Street’s $29.74 consensus. This amounts to an 11.7% reduction in profit for the year.

UnitedHealth Group stock forecast

The next stop for traders is $438.50 for UnitedHealth Group stock. That was the low on February 21 during another steep sell-off. Below there lies another low from April 12, 2024 near $436. The 50% midline on the Fibonacci Extension also comes nearby the February 21 low at $442.22, which lends credence to UNH finding support within this region.

However, traders will note that UNH stock blasted through the $465 to $480 region that has often acted as a demand zone in prior downturns. This could mean that the downtrend has legs.

UNH daily stock chart