By Sriparna Roy
(Reuters) -UnitedHealth's newly returned CEO, Stephen Hemsley, will likely face investor scrutiny over the largest U.S. health insurance and services company's efforts to rein in the elevated medical costs behind the withdrawal of its annual forecast.
Hemsley returned to the role in May following the abrupt departure of then-CEO Andrew Witty, who stepped down amid rising operational and financial pressures.
The company's decision in May to withdraw its 2025 earnings forecast due to soaring
medical costs and Medicare-related challenges sent its shares tumbling.
So far this year, UnitedHealth's stock has plunged more than 40%, dragging down the broader managed care sector with it.
"Investors will be looking for confidence that he (Hemsley) has got a handle on things and that he understands where things may have gone wrong and how they are going to correct it," said James Harlow, senior vice president at Novare Capital Management, which owns 46,333 shares of the healthcare company.
Hemsley, who ran the company from 2006 to 2017, has promised to rebuild trust, telling shareholders last month that regaining their confidence is a top priority.
The pressure is compounded by a federal investigation into UnitedHealth's Medicare billing practices. The company recently confirmed it was cooperating with both criminal and civil inquiries from the U.S. Department of Justice. These regulatory woes have only added to the uncertainty facing the insurer.
Wall Street analysts have lowered expectations throughout this month. Analysts expect a profit of $4.48 per share for the second quarter, according to data compiled by LSEG. That compares with expectations of $5.70 per share in May, when the company suspended its annual profit forecast.
UnitedHealth plans to establish "a prudent 2025 earnings outlook and offer initial perspectives for 2026," the company had said in June.
"Ultimately, on Tuesday, what we'd expect is more clarity on the way forward...we would expect a strategy, a roadmap laid out," said Sahil Bhatia, managing director of life sciences at Manning & Napier.
"I think one of the big issues over the last few months has been just the surprises...so we would expect more consistent execution going forward after laying out that roadmap," Bhatia said.
At least two investors said they anticipate UnitedHealth will reset its 2025 profit forecast in the range of $18 to $20 per share, far below the company's previous outlook of $26 to $26.50.
This might be conservative but is an appropriate start for Hemsley's first call, said Jeff Jonas, portfolio manager at Gabelli Funds.
UnitedHealth has previously built a reputation to guide conservatively and raise its outlook as the year progresses.
But this time, investors warn, withholding guidance altogether would be damaging. "If they continue to not give an EPS outlook for 2025, that will be damaging," Harlow added.
Apart from financial turbulence, the company has also faced reputational challenges. It has moved to ease prior authorization requirements after a public outcry following the killing of a UnitedHealth executive last December.
The Optum unit, once a growth driver for UnitedHealth, has also emerged as a key area of concern. Last quarter, the company flagged "unanticipated changes" in its Optum business that impacted planned 2025 reimbursements.
"Among all the overhangs, Optum Health remains the biggest concern," said Deutsche Bank analyst George Hill.
UnitedHealth has also grappled with the fallout from a major cyberattack last year that disrupted claims processing across its Change Healthcare unit.
(Reporting by Sriparna Roy in Bengaluru; Editing by Sriraj Kalluvila)
