UnitedHealth Group (UNH) stock took a hit after the largest health insurer in the US reported higher than expected medical costs in the third quarter, with the medical care ratio rising to 85.2%. This news caused the Dow Jones index to slip by half a percentage point and UnitedHealth stock dropped by 9% on Tuesday. Despite this negative news, the company still managed to beat Wall Street expectations on both the top and bottom lines, with adjusted EPS and revenue rising by 9% from a year ago.
UnitedHealth’s management provided a full-year 2024 outlook which included charges related to its South American operations and a cyberattack, resulting in a lower adjusted EPS forecast. Additionally, the company shocked the market with a 2025 adjusted EPS target of $30.00, which was lower than analyst expectations. However, the operating cost ratio fell from 15% to 13.2% year over year, with strong revenue growth in both its insurance and healthcare services units.
Looking at the stock forecast, UNH stock broke through its 100-day Simple Moving Average (SMA), which could signal further downward movement towards the 200-day SMA near $525. Longer-term support levels between $465 and $480 are also in view, with the lowest price of the year at $436.38 less relevant due to the company’s ability to adjust premiums and maintain a healthy business turnover. Once the stock overcomes the 50-day SMA near $583, the market may forget about the recent earnings report.
In conclusion, despite the disappointing news about rising medical costs impacting UnitedHealth Group’s stock performance, the company still managed to exceed revenue and EPS expectations in Q3. The forecast for 2025 fell short of analyst estimates, but the company’s strong operational performance and revenue growth in key units suggest a bright future ahead. Investors will be monitoring the stock closely as it navigates through technical levels and potential support zones in the coming weeks.
