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Healthcare ETFs to Buy as UnitedHealth Beats on Q3 Earnings
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Key Takeaways
UnitedHealth's Q3 adjusted EPS beat estimates by 13.8%, while revenues exceeded expectations by 1.2%.
UnitedHealth raised its 2026 adjusted EPS guidance to at least $20.50 despite elevated commercial costs.
ETFs like IHF offer diversified healthcare exposure, with UnitedHealth weightings ranging more than 4%.
Shares of UnitedHealth Group Incorporated (UNH - Free Report) have jumped 6.3% on the bourses since the company released better-than-expected third-quarter 2026 results on Oct. 13. The healthcare service provider's quarterly figures showed strong financial execution and operational recovery, even as underlying headwinds persisted in the form of membership losses and elevated commercial costs.
The company’s chief financial officer Wayne DeVeydt raised 2026 adjusted earnings guidance to at least $20.50 per share, setting a stronger earnings base heading into 2027.
Given this upbeat outlook, investors may want to invest in America’s largest health insurer right away. However, given the current U.S. government's legislation last year, which includes major Medicaid funding cuts this year, UNH’s Medicaid business is likely to face significant downward margin pressure. To this end, UNH’s management continues to view 2026 as a trough year for core Medicaid margins.
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 avoiding the risks associated with its Medicaid business.
Before suggesting a few such ETFs for your portfolio, let’s take a detailed look at UnitedHealth’s third-quarter performance across key metrics and provide a brief outlook on what to expect in the coming months.
A Brief Analysis of UNH’s Q3 Results
UnitedHealth’s third-quarter adjusted earnings per share (EPS) of $4.69 beat the Zacks Consensus Estimate by 13.8%, while its revenues beat the consensus mark by 1.2%.
On a year-over-year basis, the company delivered a mixed performance. Its earnings improved 60.6%, but revenues slipped 0.4%. UNH’s adjusted medical care ratio (MCR) was 88.4% in the third quarter, which improved 150 basis points (bps) from the year-ago period.
The improvement reflects better medical cost management, benefit and pricing alignment, and care delivery enhancements. Its operating cost ratio improved 70 bps year over year to 12.8% in the quarter, backed by ongoing investments to modernize operations and streamline administrative processes.
In its Optum Health business, UNH delivered strong performance in the third quarter, driven by the continued return to value-based care principles, combined with strong execution across its clinical programs and operational improvements, enabling clinicians to focus more on their patients and improve patient experience.
As for UNH’s commercial business, the company witnessed stable performance in the third quarter despite a tough market. However, UNH continues to experience higher-than-expected costs for this business, owing to a small number of doctors abusing the dispute process under the No Surprises Act (as mentioned in its third-quarter transcript), in addition to rising costs for specialty drugs and clinician care.
UNH expects to pay more than $8 billion in dividends by 2026-end.
Meanwhile, to make patient care faster and easier, the company is simplifying its prior approval process by cutting paperwork, increasing transparency and standardizing requirements across the industry. By the end of 2026, UNH plans to eliminate 30% of overall approval requirements, including nearly two-thirds of those for pediatric care and 10% from home health services, while expanding its "Gold Card" program to completely exempt top-performing doctors from routine approvals.
Additionally, more than 70% of remaining approvals will be streamlined through standardized electronic submissions, and performance metrics will be published publicly to keep clinicians and members informed.
Analysts’ Reaction
Following UNH’s third-quarter results, Barclays analyst Andrew Mok maintained an Overweight rating but cut the stock’s price target from $441 to $440. Baird analyst Michael Ha maintained a Neutral rating and lowered the price target from $453 to $427.
UNH-Heavy ETFs to Watch
iShares U.S. Healthcare Providers ETF (IHF - Free Report)
This fund, with net assets worth $1.40 billion, offers exposure to 61 U.S. companies in the healthcare providers subsector, including insurers and service operators. UNH holds the first spot in this fund, with a 22.22% weight.
IHF jumped 22.4% year to date and charges 37 bps in fees. It traded at a good volume of 3.21 million shares in the last trading session and holds a Zacks ETF Rank #2 (Buy).
State Street Health Care Select Sector SPDR ETF (XLV - Free Report)
This fund, with assets under management (AUM) worth $46.19 billion, includes 61 companies in the pharmaceuticals; health care equipment and supplies; health care providers and services; biotechnology; life sciences tools and services; and health care technology industries. UNH holds the fourth spot in this fund, with a 5.68% weight.
XLV rose 14.2% year to date and charges 8 bps in fees. It traded at a good volume of 8.55 million shares in the last trading session and sports a Zacks ETF Rank #1 (Strong Buy).
This fund, with net assets worth $21.8 billion, is exposed to companies that manufacture health care equipment and supplies or that provide health care-related services, and firms that are primarily involved in the research, development, production and marketing of pharmaceuticals and biotechnology products. UNH holds the fifth spot in this fund, with a 4.65% weight.
VHT soared 13.7% year to date and charges 9 bps in fees. It traded at a volume of 0.25 million shares in the last trading session and sports a Zacks ETF Rank #1.
Image: Bigstock
Healthcare ETFs to Buy as UnitedHealth Beats on Q3 Earnings
Key Takeaways
Shares of UnitedHealth Group Incorporated (UNH - Free Report) have jumped 6.3% on the bourses since the company released better-than-expected third-quarter 2026 results on Oct. 13. The healthcare service provider's quarterly figures showed strong financial execution and operational recovery, even as underlying headwinds persisted in the form of membership losses and elevated commercial costs.
The company’s chief financial officer Wayne DeVeydt raised 2026 adjusted earnings guidance to at least $20.50 per share, setting a stronger earnings base heading into 2027.
Given this upbeat outlook, investors may want to invest in America’s largest health insurer right away. However, given the current U.S. government's legislation last year, which includes major Medicaid funding cuts this year, UNH’s Medicaid business is likely to face significant downward margin pressure. To this end, UNH’s management continues to view 2026 as a trough year for core Medicaid margins.
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 avoiding the risks associated with its Medicaid business.
Before suggesting a few such ETFs for your portfolio, let’s take a detailed look at UnitedHealth’s third-quarter performance across key metrics and provide a brief outlook on what to expect in the coming months.
A Brief Analysis of UNH’s Q3 Results
UnitedHealth’s third-quarter adjusted earnings per share (EPS) of $4.69 beat the Zacks Consensus Estimate by 13.8%, while its revenues beat the consensus mark by 1.2%.
On a year-over-year basis, the company delivered a mixed performance. Its earnings improved 60.6%, but revenues slipped 0.4%.
UNH’s adjusted medical care ratio (MCR) was 88.4% in the third quarter, which improved 150 basis points (bps) from the year-ago period.
The improvement reflects better medical cost management, benefit and pricing alignment, and care delivery enhancements.
Its operating cost ratio improved 70 bps year over year to 12.8% in the quarter, backed by ongoing investments to modernize operations and streamline administrative processes.
In its Optum Health business, UNH delivered strong performance in the third quarter, driven by the continued return to value-based care principles, combined with strong execution across its clinical programs and operational improvements, enabling clinicians to focus more on their patients and improve patient experience.
As for UNH’s commercial business, the company witnessed stable performance in the third quarter despite a tough market. However, UNH continues to experience higher-than-expected costs for this business, owing to a small number of doctors abusing the dispute process under the No Surprises Act (as mentioned in its third-quarter transcript), in addition to rising costs for specialty drugs and clinician care.
UNH expects to pay more than $8 billion in dividends by 2026-end.
Meanwhile, to make patient care faster and easier, the company is simplifying its prior approval process by cutting paperwork, increasing transparency and standardizing requirements across the industry. By the end of 2026, UNH plans to eliminate 30% of overall approval requirements, including nearly two-thirds of those for pediatric care and 10% from home health services, while expanding its "Gold Card" program to completely exempt top-performing doctors from routine approvals.
Additionally, more than 70% of remaining approvals will be streamlined through standardized electronic submissions, and performance metrics will be published publicly to keep clinicians and members informed.
Analysts’ Reaction
Following UNH’s third-quarter results, Barclays analyst Andrew Mok maintained an Overweight rating but cut the stock’s price target from $441 to $440. Baird analyst Michael Ha maintained a Neutral rating and lowered the price target from $453 to $427.
UNH-Heavy ETFs to Watch
iShares U.S. Healthcare Providers ETF (IHF - Free Report)
This fund, with net assets worth $1.40 billion, offers exposure to 61 U.S. companies in the healthcare providers subsector, including insurers and service operators. UNH holds the first spot in this fund, with a 22.22% weight.
IHF jumped 22.4% year to date and charges 37 bps in fees. It traded at a good volume of 3.21 million shares in the last trading session and holds a Zacks ETF Rank #2 (Buy).
State Street Health Care Select Sector SPDR ETF (XLV - Free Report)
This fund, with assets under management (AUM) worth $46.19 billion, includes 61 companies in the pharmaceuticals; health care equipment and supplies; health care providers and services; biotechnology; life sciences tools and services; and health care technology industries. UNH holds the fourth spot in this fund, with a 5.68% weight.
XLV rose 14.2% year to date and charges 8 bps in fees. It traded at a good volume of 8.55 million shares in the last trading session and sports a Zacks ETF Rank #1 (Strong Buy).
Vanguard Health Care Index Fund ETF (VHT - Free Report)
This fund, with net assets worth $21.8 billion, is exposed to companies that manufacture health care equipment and supplies or that provide health care-related services, and firms that are primarily involved in the research, development, production and marketing of pharmaceuticals and biotechnology products. UNH holds the fifth spot in this fund, with a 4.65% weight.
VHT soared 13.7% year to date and charges 9 bps in fees. It traded at a volume of 0.25 million shares in the last trading session and sports a Zacks ETF Rank #1.