Healthcare ETFs in Focus as UnitedHealth Rises 4% Post Mixed Q4 Results

Shares of UnitedHealth Group Incorporated UNH rose 4% during the last trading session at the bourses, following its mixed fourth-quarter 2025 results on Jan. 27, 2026. Higher-than-expected operating costs and charges related to a loss of contract within the Optum portfolio weighed on its year-over-year earnings performance, even as expanded domestic membership supported growth.

Looking ahead, the company expects its medical care ratio — a measure of total medical expenses paid relative to premiums collected — to be 88.8%, plus or minus 50 basis points (bps) in 2026, reflecting an improvement from 89.1% reported last year. Such a low ratio for a health insurer typically indicates that UNH can generate higher profitability and conduct better efficiency in controlling costs. 

Given this upbeat outlook, investors may want to invest in America’s largest health insurer right away. However, considering the legislation taken by the current U.S. government last year,  which entails major funding cuts this year in Medicaid funding, UNH’s Medicaid business is likely to see significant downward margin pressure. To this end, UNH’s management expects a 21% cut in its 2026 Medicaid membership. 

Against this backdrop, prudent investors may be drawn to diversified healthcare exchange-traded funds (ETFs) with significant exposure to UNH, alongside other healthcare giants across pharma, biotech, and medtech, as a more strategic investment choice. This would help investors gain from UNH’s upbeat outlook this year, while also avoiding the risk associated with its Medicaid business. 

Before suggesting a few such ETFs for your portfolio, let’s take a detailed look at UnitedHealth’s fourth-quarter performance across key metrics and provide a brief outlook on what to expect in the coming months.

A Brief Analysis of UNH’s Q4 Results

UnitedHealth’s fourth-quarter adjusted earnings per share (EPS) of $2.11 beat the Zacks Consensus Estimate by 1%, while its revenues missed the consensus mark by a whisker. On a year-over-year basis, the company delivered a mixed performance, although the trend was opposite this time. Its earnings declined 69.1%, while its revenues rose 12.3%. 

The revenue performance was driven by UNH’s domestic membership expansion of over 415,000 lives. 

Its operating cost ratio deteriorated on a year-over-year basis, primarily due to a charge related to broad-based employee incentives and funding to the UnitedHealth Foundation.

Looking ahead, UNH expects its 2026 revenues to exceed $439.0 billion, which indicates a 2% year-over-year decline on account of its planned right-sizing across the enterprise. On the other hand, its operating cost ratio is expected to reflect improvement from last year’s adjusted operating cost ratio, on the back of disciplined cost management and benefits from ongoing productivity initiatives.

The company projects to witness growth across all four of its reporting business segments, with double-digit improvements at UnitedHealthcare and low to high single-digit adjusted growth across its Optum segments in 2026.

In 2026, UNH aims to prioritize margin recovery by adjusting its product pricing and positioning. This should result in 13% growth in its adjusted operating earnings, driven largely by optimized performance in the Commercial and Medicare sectors. While these shifts are expected to expand margins by 40 basis points, the company anticipates a membership reduction of 2.3-2.8 million as it realigns its portfolio.

Analysts’ Reaction

Following UNH’s Q4 results, RBC Capital analyst Ben Hendrix maintained an Outperform rating on the stock while lowering the price target from $408 to $361. In a similar move, UBS analyst A.J. Rice also reaffirmed his rating while revising his price target downward. Rice also maintained UnitedHealth with a Buy recommendation, but lowered the price target from $430 to $410.

UNH-Heavy ETFs to Watch

iShares U.S. Healthcare Providers ETF IHF

This fund, with net assets worth $726.3 million, provides exposure to 62 U.S. companies that provide health insurance, diagnostics and specialized treatment. Of these, UnitedHealth Group takes the first spot, accounting for a 20.52% share. CVS Health CVS (12.18%) and Elevance Health ELV (9.56%) hold the second and third positions in this fund, respectively.

IHF has gained 6.7% over the past six months and charges 38 bps in fees. 

Vanguard Health Care ETF VHT 

With net assets of $17.3 billion, this fund provides exposure to 416 companies engaged in health care equipment manufacturing, health care services, and the research, development, and marketing of pharmaceuticals and biotechnology products. Of these, UnitedHealth Group takes the fourth spot, accounting for a 4.09% share. Pharma giants: Eli Lily LLY (12.59%), AbbVie ABBV (4.94%) and Johnson & Johnson JNJ (4.49%) hold the top three spots in this fund. 

VHT has rallied 15.9% over the past six months and charges 9 bps in fees. 

iShares U.S. Healthcare ETF IYH 

This fund, with net assets worth $3.52 billion, provides exposure to 103 U.S. healthcare equipment and services, pharmaceuticals, and biotechnology companies. Of these, UnitedHealth Group takes the fifth spot, accounting for a 4.61% share. LLY (14.13%), JNJ (9.44%) and ABBV (6.68%) hold the top three spots in this fund. 

IYH has soared 15.2% over the past six months and charges 38 bps in fees. 

Health Care Select Sector SPDR Fund XLV 

This fund, with net assets worth $40.87 billion, provides exposure to 60 companies from the pharmaceuticals; health care equipment and supplies, health care providers and services, biotechnology; life sciences tools and services, and health care technology industries. Of these, UnitedHealth Group takes the fifth spot, accounting for a 4.55% share. LLY (14.65%), JNJ (9.60%) and ABBV (7.03%) hold the top three spots in this fund. 

XLV has surged 15% over the past six months and charges 8 bps in fees. 

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

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

Zacks Investment Research