UNH Crashes Post Q1 Earnings: Should You Buy the Dip With ETFs?

UnitedHealth Group UNH, the largest U.S. health insurer, reported dismal first-quarter 2025 results. It missed both earnings and revenue estimates and lowered its full-year guidance amid rising medical costs. This sent UNH's shares into the biggest tailspin in more than two decades, spreading pessimism in the overall insurance sector. 

UNH shares tumbled 22.4% on the day following the results, marking the worst daily decline since 1998 and the company’s fourth-worst day on Wall Street since going public in 1984. The slump has erased about $120 billion from the company’s market capitalization. However, this seems an overreaction to the earnings announcement and outlook, presenting a strategic long-term buying opportunity. The historical data shows UNH's consistent recovery and higher trading levels after significant drops.

As such, investors could tap the beaten-down price with ETFs having the largest allocation to this health insurance giant. These are iShares U.S. Healthcare Providers ETF IHF, Health Care Select Sector SPDR Fund XLV, JPMorgan Healthcare Leaders ETF JDOC, Fidelity MSCI Health Care Index ETF (FHLC) and iShares U.S. Healthcare ETF IYH.

Earnings in Focus

Earnings per share came in at $7.20, missing the Zacks Consensus Estimate of $7.27 but improving 4.2% from the year-ago earnings of $6.16. Revenues grew 9.8% year over year to $109.6 billion but were shy of the estimated $111.1 billion. (Find the latest EPS estimates and surprises on Zacks Earnings Calendar.)

Optum revenues increased 4.6% to $63.9 billion. Medical ratio (a measure of the percentage of premiums paid out for medical services) rose 0.5 percentage points year over year to 84.8%. Management forecasts that the ratio will be in the range of 87%-88% for 2025.

The number of consumers served with self-funded commercial benefits increased by about 700,000 in the first quarter and the number of people served by the company’s offerings for seniors and people with complex needs grew by 545,000 and is expected to go up to 800,000 in 2025. People served by the company’s state-based community plans increased to 7.6 million members. Optum Health continues to expect to grow to serve 650,000 new value-based care patients in 2025.   

The health insurer reaffirmed its revenue guidance of $450-$455 billion for 2025 but slashed its earnings per share guidance to $26.00-$26.50 from $29.50-$30.00, citing “heightened care activity indications within UnitedHealthcare’s Medicare Advantage businesses" and "a greater-than-expected impact to current and new complex patients from the ongoing Medicare funding reductions enacted by the previous administration." 

ETFs in Focus

Let’s delve into each ETF below:

iShares U.S. Healthcare Providers ETF (IHF)

iShares U.S. Healthcare Providers ETF follows the Dow Jones U.S. Select Healthcare Providers Index with exposure to companies that provide health insurance, diagnostics and specialized treatment. The fund holds 64 securities in its basket. UNH occupies the top position with a 22.3% share (read: 6 ETFs Showing Great Resilience Amid Market Sell-Offs). 

iShares U.S. Healthcare Providers ETF has amassed $683.4 million in its asset base, while volume is good at about 138,000 shares per day, on average. It charges 40 bps in annual fees and has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook.

Health Care Select Sector SPDR Fund (XLV)

Health Care Select Sector SPDR Fund is the most popular healthcare ETF and follows the Health Care Select Sector Index. It holds 60 securities in its basket, with UnitedHealth taking the second spot at 10.8% of the assets. Pharma, healthcare equipment & supplies, healthcare providers & services, and biotechnology take the largest share at 31.2%, 22.5%, 21.5% and 16.3%, respectively, from a sector look.

Health Care Select Sector SPDR Fund has AUM of $35.3 billion in its asset base and trades in a heavy volume of around 11.6 million shares. The expense ratio comes in at 0.08%. XLV has a Zacks ETF Rank #1 (Strong Buy) with a Medium risk outlook.

JPMorgan Healthcare Leaders ETF (JDOC)

JPMorgan Healthcare Leaders ETF is actively managed. It looks to invest primarily in healthcare stocks across pharmaceutical, biotechnology, healthcare services and medical technology companies. It holds 53 stocks in its basket with UnitedHealth occupying the second position at 7.5% of the total assets. 

JPMorgan Healthcare Leaders ETF has gathered $7.5 million in its asset base and charges 65 bps in annual fees. It trades in an average daily volume of under 500 shares.

Fidelity MSCI Health Care Index ETF (FHLC)

Fidelity MSCI Health Care Index ETF provides exposure to 349 healthcare stocks and tracks the MSCI USA IMI Health Care Index. UnitedHealth occupies the second position with 7.8% of the assets. Pharma accounts for 28% share while healthcare equipment and supplies, healthcare providers and services, and biotech round off the top three spots with double-digit exposure each. 

Fidelity MSCI Health Care Index ETF has AUM of $2.5 billion. Its expense ratio is 0.08%, while volume is good at 161,000 shares a day. FHLC has a Zacks ETF Rank #3 with a Medium risk outlook (see: all the Healthcare ETFs here). 

iShares U.S. Healthcare ETF (IYH)

iShares U.S. Healthcare ETF offers exposure to 104 U.S. healthcare equipment and services, pharmaceuticals, and biotechnology companies by tracking the Russell 1000 Health Care RIC 22.5/45 Capped Gross Index. Here again, UnitedHealth is the second firm, accounting for 8.3% of the total assets. In terms of industrial exposure, pharma takes the top spot at 31.23, followed by healthcare equipment (22.1%) and biotech (18.3%). 

iShares U.S. Healthcare ETF has amassed $2.9 billion in its asset base while charging 39 bps in annual fees. It trades in a good volume of around 385,000 shares a day and has a Zacks ETF Rank #3 with a Medium risk outlook.
 

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This article originally published on Zacks Investment Research (zacks.com).

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