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UnitedHealth (UNH) is under pressure after reporting its Q4 results this morning. The health insurance giant delivered a modest EPS beat, while revenue increased 12.3% yr/yr to $113.22 bln, in line with expectations. Weighing on shares today, however, is its cautious FY26 guidance. UNH expects adjusted EPS of greater than $17.75, which is still above expectations, but it guided FY26 revenue to more than $439 bln, which was well below expectations and implies a rare top line decline. Adding to the pressure is the Trump administration's proposed near flat Medicare Advantage rate update for 2027, which management said does not reflect current utilization and cost trends.

• Expanding on the proposed 2027 Medicare Advantage rates, management called the advance notice disappointing, as it represents another funding cut after a series of reductions over the past three years, and warned it could force meaningful benefit trims and another review of plan and geographic footprints across the industry.
• At UnitedHealthcare, management said pricing and product repositioning actions are taking hold, but Q4 pressure was clear as earnings from operations fell to $0.3 bln from $3.0 bln and operating margin compressed to 0.4% from 4.0%.
• Within Medicare, UNH now expects greater than anticipated Medicare Advantage membership contraction of 1.3 mln-1.4 mln in 2026 as it prioritizes profitability. It is targeting about 50 bps of Medicare margin improvement versus 2025. Medicaid is expected to remain a headwind, pressured by state funding shortfalls and rate and acuity mismatches.
• At Optum, management continues to tighten focus and reshape the portfolio, but Q4 results underscored the execution gap as earnings from operations fell to $0.1 bln from $4.8 bln and operating margin compressed to 0.1% from 7.4% amid restructuring and other late year actions.
• For 2026, Optum expects low to high single digit adj. earnings growth and 20-90 bps of margin expansion, driven by Optum Insight on cost discipline and the Optum Financial realignment, with Optum Rx reflecting new customer implementations and operating efficiencies.

Briefing.com Analyst Insight

The quarter continues to reinforce the challenging dynamics health insurers face, with elevated utilization and rate pressure still weighing on profitability. While UNH is taking steps to strengthen positioning through repricing and product repositioning, its FY26 medical care ratio guide of about 88.8% +/- 50 bps signals elevated medical activity is likely to persist, so it remains a bit of a show me story on whether these actions can drive cleaner margin improvement. It was nice to see the upside EPS guide, which suggests the actions are progressing better than expected, but the rare top line decline implied in the revenue guide, driven by planned right sizing, tempers the enthusiasm. And while there was no formal guidance on the new Medicare Advantage rate proposal, the commentary suggests added challenges and potential benefit and footprint adjustments if rates hold. Ultimately, disappointing revenue guidance and the policy overhang are weighing on shares today, as investors look for clearer evidence of margin stabilization through FY26.