UnitedHealth Jumps 12% in a Month: But is it Healthy Enough to Buy?

UnitedHealth Group Incorporated UNH has staged a sharp comeback, with shares climbing 12% over the past month, trimming its year-to-date loss to 29.1%. The move marks an outperformance versus both the broader industry’s 9.3% gain and the S&P 500 Index’s 4% rise during the same period. Among key peers, Humana Inc. HUM fell 4.9%, while Elevance Health, Inc. ELV advanced 13.6%, underscoring a wide divergence in managed care performance.One-Month Price Performance – UNH, HUM, ELV, Industry & S&P 500 Image Source: Zacks Investment ResearchHistorically viewed as a defensive mainstay in healthcare, UnitedHealth earned its reputation through consistent earnings, a dependable dividend stream, and a low beta of 0.47, qualities that appealed to risk-averse investors seeking stability. But from 2024 onward, what once looked like healthy pullbacks began to feel more like warning signs as multiple headwinds piled up. The recent rally, however, suggests sentiment may finally be shifting.One major catalyst came from Warren Buffett’s Berkshire Hathaway Inc. (BRK.B), which disclosed a $1.57 billion purchase of more than 5 million UNH shares. The news fueled a surge of institutional and retail buying, sparking a rebound from its extended downtrend. Adding to the optimism, UnitedHealth reaffirmed its updated 2025 adjusted EPS guidance despite the expected short-term dilution from its August acquisition of Amedisys due to financing and integration costs.Still, the stock currently trades above the Wall Street average price target of $324.48, suggesting a 9.6% downside from current levels. Image Source: Zacks Investment ResearchIs UNH Cheap Enough to Chase?Valuation remains a sticking point. UNH’s forward P/E stands at 20.88X, higher than its five-year median of 19.24X and above the industry average of 16.65X. By comparison, Humana trades at 20.90X, while Elevance sits far lower at 11.27X. The premium reflects confidence in UnitedHealth’s long-term stability, but it also suggests limited near-term upside potential. Image Source: Zacks Investment ResearchUNH’s HeadwindsUnitedHealth continues to wrestle with elevated medical costs and utilization trends that have pressured profitability across the managed care space. The company’s medical loss ratio — a key measure of claims costs relative to premiums — has steadily worsened, rising from 83.2% in 2023 to 85.5% in 2024, and further to 89.4% in the second quarter of 2025. The higher ratio signals shrinking margins and limited room for error.Regulatory and legal scrutiny adds another layer of uncertainty. The Department of Justice is probing UnitedHealth’s Medicare billing practices, reimbursement policies and Optum Rx’s pharmacy benefit management operations. Additionally, the company faces questions surrounding its handling of loans to healthcare providers following the 2024 Change Healthcare cyberattack.Meanwhile, President Donald Trump’s “most-favored nation” executive order could disrupt the pharmacy benefit management model, potentially reshaping how Optum Rx negotiates and manages drug pricing.Unfavorable Earnings Outlook for UNHAnalyst sentiment has turned cautious. The Zacks Consensus Estimate projects a sharp 41.4% drop in 2025 EPS to $16.21, even as revenues are expected to rise 12.1% year over year. This mismatch underscores concerns that top-line growth isn’t translating into bottom-line strength. The consensus forecast for the third quarter points to a steep 59.9% year-over-year earnings decline, suggesting profitability remains under intense pressure.Compounding the uncertainty, the company missed earnings estimates in two of the last four quarters, beating in the other two, with an average earnings surprise of negative 3.3%.UnitedHealth Group Incorporated Price, Consensus and EPS Surprise UnitedHealth Group Incorporated price-consensus-eps-surprise-chart | UnitedHealth Group Incorporated QuoteUNH Charting a Recovery Course?Despite its challenges, UnitedHealth remains a powerhouse in the U.S. healthcare sector, benefiting from unmatched scale, diversification and a massive customer base. As of June 30, 2025, its UnitedHealthcare division served 50.1 million members, up 2.1% from a year ago, driven primarily by self-funded commercial plans.Management has taken proactive steps to stabilize operations. Facing tighter regulatory conditions, slashed funding and higher healthcare expenses, UnitedHealth plans to curtail its Medicare Advantage presence for this year, exiting more than 100 plans across 109 counties in 16 states. However, the move will affect roughly 180,000 members, per multiple reports.While eligibility redeterminations and reduced government subsidies will likely weigh on membership growth, demand for UnitedHealth’s high-margin, fee-based commercial plans is expected to offset part of the impact. The company also continues to generate robust cash flow, producing $24.2 billion in operating cash in 2024 and $6.3 billion during the first half of 2025.Although lower profits may temporarily slow cash generation, strong operational efficiency and disciplined expense management should help sustain margins. Backed by its cash flow resilience, UnitedHealth continues to reward shareholders, distributing over $5.5 billion through dividends and buybacks in the first half of 2025.Bottom LineUnitedHealth’s recent rebound has certainly rekindled investor interest, helped by Berkshire Hathaway’s backing and management’s steady guidance. Yet, beneath the surface, the challenges remain significant as rising medical costs, tightening regulation and earnings pressure continue to cloud its near-term outlook. While the company’s scale, diversification and cash flow generation lend it resilience, the premium valuation and muted profit trajectory limit upside potential in the short run.Overall, UnitedHealth offers a balanced risk-reward profile at current levels, steady but not without challenges. Currently, the stock carries a Zacks Rank #3 (Hold), suggesting investors may be better served by patience until clearer signs of sustainable margin recovery emerge.You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.5 Stocks Set to DoubleEach was handpicked by a Zacks expert as the #1 favorite stock to gain +100% or more in the coming year. While not all picks can be winners, previous recommendations have soared +112%, +171%, +209% and +232%.Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.Today, See These 5 Potential Home Runs >>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 UnitedHealth Group Incorporated (UNH): Free Stock Analysis Report Berkshire Hathaway Inc. (BRK.B): Free Stock Analysis Report Humana Inc. (HUM): Free Stock Analysis Report Elevance Health, Inc. (ELV): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks