By Amina Niasse
NEW YORK, April 21 (Reuters) - UnitedHealth on Tuesday raised its annual profit forecast and beat Wall Street expectations for the first quarter as the healthcare conglomerate kept costs in check and received improved government payments for its health insurance business.
Shares of the healthcare conglomerate rose nearly 6% in premarket trading.
The company now expects 2026 adjusted profit per share to be greater than $18.25, an increase of 50 cents from its prior forecast of greater than $17.75
per share. Analysts were expecting a profit of $17.86 per share for 2026, according to data compiled by LSEG.
On an adjusted basis, the company earned $7.23 per share in the first quarter, compared with the average analyst estimate of $6.57 per share, according to data compiled by LSEG, a beat of 66 cents.
CFO Wayne DeVeydt said the company is focused on maintaining a "prudent" approach to its 2026 outlook, in order to maintain trust and transparency.
"You may say 'it looks like you beat the quarter by more than that. Why not raise by more?'" said DeVeydt. "We like to believe our execution is the primary driver, but we want to see if any of these trends change in April and May."
KEEPING COSTS IN CHECK
In January, the healthcare giant said 2026 revenue would decline for the first time in decades, in a blow to CEO Stephen Hemsley's efforts to rebuild investor confidence after a difficult period for UnitedHealth that included the killing of a top executive, an unexpected surge in medical costs, a federal probe and Americans' anger at insurance industry practices.
The industry has been grappling with increased costs since mid-2023 due to a surge in demand for healthcare services under government-backed Medicare plans for older adults or individuals with disabilities.
Changes in enrollment for Medicaid plans for lower-income Americans have also left insurers with those who require more medical care, adding to costs for insurers.
UnitedHealth reported a first-quarter medical cost ratio - the percentage of premiums spent on medical care - of 83.9%, compared with analysts' estimates of 85.70%.
"We actually think we're going to do a little bit better than we anticipated," said DeVeydt, who said the company expects to lose 1.3 million Medicaid members. "Still losing membership, but retaining a little bit more than we thought."
OPTUM WEIGHS ON EARNINGS
The company's Optum health services unit weighed on earnings, as its operating income decreased by 15% to $3.3 billion. The company said this was due to heightened medical costs and ongoing investment it is making to change Optum's operations.
Revenue at Optum fell 0.2%, as fewer patients enrolled in its coordinated care plans.
The dip in enrollment is intentional, DeVeydt said, as the company exited less favorable contracts. UnitedHealth announced during a fourth-quarter earnings call this year that Optum faced regulatory and cost challenges, representing an $11 billion blow to the unit over a three-year period.
First-quarter revenue at Optum, which provides primary care, was $24.1 billion. Revenue at Optum Rx, UnitedHealth's pharmacy benefit manager, rose 2% to $35.7 billion.
DeVeydt said Optum changed the way it schedules visits for customers, in an effort to get more people into doctors' offices, increasing visits by 12% during the first quarter.
The company also invested in sending Optum professionals into hospitals to coordinate at-home care, in an effort to reduce readmissions, which are more costly than sending patients to a nursing facility.
(Reporting by Amina Niasse in New York; Editing by Matthew Lewis)
