UnitedHealth Group Navigates Turnaround Amidst Projected 2026 Revenue Decline
UnitedHealth Group has reported its fourth-quarter earnings, exceeding adjusted earnings per share expectations. However, the company projects a significant decline in 2026 revenue as it implements a turnaround strategy to address elevated medical costs, strategic divestitures, and shifts in the healthcare landscape. Investors are closely scrutinizing the company's future guidance following a challenging previous year.
The company anticipates a decline in 2026 revenue, marking the first time in a decade such a projection has been made, driven by divestitures, membership decline, and a Medicare coding system transition.
Fourth-Quarter Performance Highlights
For the fourth quarter, UnitedHealth Group's adjusted earnings per share reached $2.11, slightly surpassing analyst expectations of $2.10. Quarterly revenue totaled $113.2 billion, falling just below analysts' average expectations of $113.82 billion.
2026 Outlook: A Projected Decline
UnitedHealth Group projects its 2026 revenue to exceed $439 billion, which represents a 2% year-over-year decline. This projection is notably below analysts' average expectations of $454.6 billion.
Chief Financial Officer Wayne DeVeydt highlighted the significance of this outlook:
"This marks the first time in a decade the company anticipates declining revenue."
Key Factors Driving the 2026 Decline
Three primary factors contribute to UnitedHealth Group's projected revenue decline in 2026:
- Divestitures: The company completed divestitures in the fourth quarter of the prior year and plans additional sales, including its operations in the United Kingdom and South America.
- Membership Decline: A decrease of over 3 million U.S. members is anticipated in 2026.
- Medicare Coding System Transition: 2026 is the final year of the transition to Medicare's V28 coding system. This transition is expected to result in a $6 billion revenue impact, with $2 billion projected to affect UnitedHealthcare and the remainder impacting its Optum health-care unit.
Medical Cost Projections
Regarding medical costs, the company expects its insurance segment's medical benefit ratio (MBR) for 2026 to be 88.8%, plus or minus 50 basis points. This represents an improvement from 89.1% in 2025, as a lower MBR typically indicates higher profitability. Medical costs for Medicare Advantage patients remained elevated in the fourth quarter but did not grow beyond expectations.
A Challenging Previous Year (2025)
UnitedHealth Group experienced a challenging 2025, marked by several significant events:
- A cyberattack on its technology unit.
- Rising medical costs across its operations.
- A federal investigation into company practices.
- The death of its insurance unit head.
The company's stock concluded 2025 with a decline exceeding 30%.
Leadership and Market Response
Investor confidence reportedly improved after Stephen Hemsley returned as CEO in May, following a quarter earlier in the year that delivered lower-than-expected results. By October, UnitedHealth revised its earnings outlook upwards, anticipating improved margins and a resumption of growth in 2026.
Broader Industry Impact and Future Growth
UnitedHealth Group's guidance is considered highly influential for the broader managed care sector, as it helps establish expectations across the industry. Shares of UnitedHealth and other health insurers recently experienced declines following the Centers for Medicare and Medicaid Services' (CMS) proposal of nearly flat payment rates for Medicare Advantage, which influences premiums, benefits, and insurer profits.
Despite the projected 2026 revenue decline, management has indicated the potential for sustainable double-digit growth beginning in 2027. The company's recent decision to rebate profits from Affordable Care Act (ACA) plans was also noted.
The stock has seen an increase of over 5% so far this year. The upcoming earnings report is viewed as significant for demonstrating management's credibility, though a range of opinions persists among Wall Street analysts.