UnitedHealth Group (UNH) shares continued their downward trajectory on Thursday, falling more than 2.4% and hitting a fresh 52-week low of $400.56 during the trading session. The stock price dipped below $402 in afternoon trading, reflecting persistent investor concerns following a challenging first quarter.
This recent slump extends a significant decline for the healthcare giant, which saw its stock plummet dramatically in mid-April. On April 17th, UnitedHealth experienced its worst single-day drop since 1998, shedding over 22% of its value after releasing disappointing first-quarter results and slashing its full-year profit outlook. The company’s CEO described the quarterly performance as “unusual and unacceptable.”
The primary drivers behind the poor Q1 results and subsequent guidance cut were unexpectedly high costs and care utilization within its crucial Medicare Advantage business. UnitedHealth, the nation’s largest provider of these private Medicare plans, was surprised by the level of care sought by members. Issues within its Optum health services division also contributed to the shortfall.
As a result, UnitedHealth significantly reduced its adjusted earnings per share (EPS) forecast for fiscal year 2025. The company now expects adjusted EPS to be between $26.00 and $26.50, a substantial reduction from its previous guidance of $29.50 to $30.00 per share.
For the first quarter, adjusted EPS came in at $7.20, slightly below consensus, while revenue of $109.6 billion also missed expectations.
Wall Street analysts reacted swiftly to the news in April, with multiple firms cutting their price targets for UNH stock. TD Cowen, RBC Capital Markets, Bernstein, Jefferies, and KeyBanc Capital Markets all lowered their targets, citing the operational setbacks and revised guidance.
However, several analysts maintained Buy or Outperform ratings, suggesting potential long-term value despite the near-term challenges.
While the stock is currently trading near its lowest point in a year and faces pressure from operational headwinds, UnitedHealth remains a dominant force in the healthcare industry. The company has a strong history of dividend growth, having increased payouts for 15 consecutive years, and possesses robust cash flows.
Investors are now closely watching whether management can effectively address the challenges in its Medicare Advantage and Optum segments to regain market confidence.