The stock is trading near 52-week highs, but under the surface, commercial segment cost trends are creating headwinds.
After a powerful run that has seen its stock climb 50% over the past year, it’s easy to look at UnitedHealth (UNH) and see a picture of corporate health
The shares sit at 99% of that high, and the company just raised its earnings guidance. But when a stock is priced this richly, the biggest risks are often hiding in plain sight, masked by the good news. For UnitedHealth, the core risk is a growing divergence.
While strength in its Medicare and Optum businesses is driving the headline numbers, a critical part of its insurance operations, its commercial segment, is facing a structural problem that management admits is getting worse, not better. Persistent Commercial Margin Pressures While investors celebrate strength in government-sponsored plans, UnitedHealth’s commercial business is struggling with what executives call “stubbornly high” costs. Medical cost trends in this segment are now running “modestly above 11%,” according to the company, an acceleration from previous levels.