FILE PHOTO: UnitedHealth Chief Executive Officer Stephen Hemsley takes part in a panel discussion titled "Getting From Care to Cure" at the Milken Institute Global Conference in Beverly Hills, California May 1, 2012. REUTERS/Danny Moloshok/File Photo

By Sriparna Roy and Amina Niasse

(Reuters) -UnitedHealth Group raised its annual profit forecast on Tuesday and said it aims for a return to growth in 2026 that should accelerate in 2027, in a sign that turnaround efforts under new CEO Stephen Hemsley were gaining steam.

UnitedHealth said it would provide a 2026 forecast in January, but Hemsley told analysts and investors on a call to discuss the results that the company is positioning itself for "durable and accelerating growth in 2026 and beyond."

Despite the company optimism, UnitedHealth shares were about flat on Tuesday.

Company executives said the path to recovery in its Medicaid business for lower-income Americans would be more challenging, and expect the mismatch between payment rates and costs for medical services to likely extend through the next year.

Hemsley, who returned as CEO in May after leading the company from 2006 to 2017, has been working to regain investor and consumer trust after a difficult period for UnitedHealth that included the murder of a top executive, an unexpected surge in medical costs, a federal probe, and Americans' anger at insurance industry practices.

He was brought in as a part of a management shakeup after the company's first earnings miss in over a decade in April.

Even with external challenges involving Medicaid plans, the CEO said, "I am confident we will return to solid earnings growth next year given the operational rigor and more prudent pricing."

It said behavioral health, specialty drugs and home-health services continued to drive higher costs during the third quarter for Medicaid plans.

The company now sees 2025 adjusted profit of at least $16.25 per share, up from its previous forecast of at least $16.00, and above analysts' estimate of $16.20 a share, according to LSEG data.

"Overall, the results, the EPS guidance increase, and management commentary were all highly encouraging, suggesting a potential reversion to the company’s historical pattern of consistent beats and upward revisions," said Daniel Barasa, portfolio manager at Gabelli Funds.

Analysts on average expect a 2026 profit of $17.59 per share.

New Chief Financial Officer Wayne Devedyt said the company would reduce locations in which it offers clinical services through Optum Health, its fastest-growing business that has recently dragged on profitability.

Optum Health experienced revenue declines this year, as it signed broad insurance contracts and took on expensive members with higher use of services.

Shifting toward plans with a narrower network of doctors will recover profit margins for the unit, Barasa said.

MEDICAL COSTS REMAIN HIGH

The healthcare conglomerate said it continues to see elevated costs, which the industry has been struggling with for more than two years.

UnitedHealth has begun the process of cleaning up the business under new management, and the results suggest trends are on track, said Oppenheimer analyst Michael Wiederhorn.

For the third quarter, the company's medical loss ratio - the percentage of premiums spent on medical care - stood at 89.9%, in line with company expectations and analysts' estimates of 89.87%. Health insurers typically aim for a ratio closer to 80%.

Quarterly revenue at the Optum health services unit was flat compared with a year ago at $25.9 billion.

Revenue at Optum Rx, UnitedHealth's pharmacy benefit manager, rose 16% to $39.7 billion, partly helped by higher prescription volumes.

On an adjusted basis, the company earned $2.92 per share for the quarter, beating analysts' average estimate by 13 cents.

(Reporting by Sriparna Roy, Sneha S K in Bengaluru and Amina Niasse in New York; Editing by Shinjini Ganguli and Bill Berkrot)