UnitedHealth Group’s Q4 2024 Results Impact Major Healthcare ETFs
TL/DR –
UnitedHealth Group, the largest U.S. health insurer, reported mixed Q4 2024 results, surpassing earnings expectations but falling short on revenue, causing a 6% drop in shares. The health insurer affirmed 2025 revenues in the range of $450-$455 billion and earnings per share of $29.50-$30.00. The results impacted ETFs with large allocations to the insurer, including iShares U.S. Healthcare Providers ETF, Health Care Select Sector SPDR Fund, iShares U.S. Healthcare ETF, Vanguard Health Care ETF, and Fidelity MSCI Health Care Index ETF.
UnitedHealth Group’s Mixed Q4 Results Put Healthcare ETFs in Focus
UnitedHealth Group (UNH), the leading U.S. health insurance provider, recently presented its Q4 2024 results. The company surpassed the Zacks Consensus Estimate for earnings but fell short on revenue, causing UNH shares to fall by nearly 6%. This development has drawn attention to ETFs like iShares U.S. Healthcare Providers ETF (IHF), Health Care Select Sector SPDR Fund (XLV), iShares U.S. Healthcare ETF (IYH), Vanguard Health Care ETF (VHT), and Fidelity MSCI Health Care Index ETF (FHLC) that have significant allocations to this health insurance heavyweight.
Key Highlights from UnitedHealth’s Q4 Results
The earnings per share for UnitedHealth were $6.81, beating the Zacks Consensus Estimate of $6.71, and surpassing the previous year’s earnings of $6.16. Revenues saw an increase of 6.8% year over year to reach $100.8 billion, falling short of the estimated $102.2 billion. This was due to a dip in its health insurance business.
Optum, a branch of UnitedHealth, saw revenues increase by 9.4% to $65.1 billion, while serving 4.7 million people in 2024 with value-based care, with plans to serve an additional 650,000 patients in 2025. The Medical ratio, a marker of the percentage of premiums used for medical services, rose to 87.6%. The projected ratio for 2025 falls within the range of 86%-87%.
Review of Healthcare ETFs Affected by UnitedHealth’s Performance
The iShares U.S. Healthcare Providers ETF (IHF) follows the Dow Jones U.S. Select Healthcare Providers Index, providing exposure to health insurance, diagnostics, and specialized treatment companies. It holds 67 securities, with UNH commanding the top position commanding 23%. IHF manages $691.9 million, with an average daily volume of about 96,000 shares. Its expense ratio is 0.40% annually, and it carries a Zacks ETF Rank #3 (Hold) with a medium risk outlook.
The Health Care Select Sector SPDR Fund (XLV) is a prominent healthcare ETF following the Health Care Select Sector Index. This ETF holds 61 securities, with UnitedHealth holding the second highest allocation at 9.7%.
The iShares U.S. Healthcare ETF (IYH) tracks the Russell 1000 Health Care RIC 22.5/45 Capped Gross Index, offering exposure to 105 U.S. healthcare equipment and services, pharmaceuticals, and biotechnology companies.
The Vanguard Health Care ETF (VHT) tracks the MSCI US Investable Market Health Care 25/50 Index and holds 416 stocks in its basket, with UnitedHealth in the second position at 9%.
The Fidelity MSCI Health Care Index ETF (FHLC) tracks the MSCI USA IMI Health Care Index, providing exposure to 368 healthcare stocks, with UnitedHealth holding the second position at 8%.
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