UnitedHealth on Thin Ice Before Q2 Earnings: Should Investors Exit?

UnitedHealth Group Incorporated UNH is set to report second-quarter 2025 results on July 29, 2025, before the opening bell. The Zacks Consensus Estimate for the to-be-reported quarter’s earnings is currently pegged at $4.94 per share on revenues of $111.6 billion. Second-quarter earnings estimates have declined by 5 cents over the past week. The bottom-line projection indicates a decrease of 27.4% from the year-ago reported number. However, the Zacks Consensus Estimate for quarterly revenues suggests year-over-year growth of 12.9%. Image Source: Zacks Investment ResearchFor the current year, the Zacks Consensus Estimate for UnitedHealth’s revenues is pegged at $448.53 billion, implying a rise of 12.1% year over year. However, the consensus mark for current-year earnings per share is pegged at $21.38, implying a plunge of 22.7% on a year-over-year basis.UnitedHealthbeat the consensus estimate for earnings in three of the last four quarters and missed once, with the average surprise being 1.2%. This is depicted in the figure below.UnitedHealth Group Incorporated Price and EPS Surprise UnitedHealth Group Incorporated price-eps-surprise | UnitedHealth Group Incorporated QuoteQ2 Earnings Whispers for UNHOur proven model does not conclusively predict an earnings beat for the company this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy), or 3 (Hold) increases the odds of an earnings beat, but that’s not the case here.UNH has an Earnings ESP of -13.10% and a Zacks Rank #4 (Sell). You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.You can see the complete list of today’s Zacks #1 Rank stocks here.What’s Shaping UNH’s Q2 Results?The Zacks Consensus Estimate for premium revenues for the second quarter indicates 13.4% year-over-year growth, whereas our model estimate suggests a 12.5% increase. Higher contributions from the UnitedHealthcare division are expected to have supported premium growth.The Zacks Consensus Estimate for UnitedHealthcare’s total domestic commercial customers suggests 1.5% year-over-year growth, whereas our estimate implies a 1.2% gain. The consensus mark for Medicare Advantage members indicates a 6.9% year-over-year rise. The consensus estimate for Medicaid memberships implies a 3.3% increase from the year-ago level. These are likely to have pushed total memberships up from the year-ago period. The consensus estimate implies 0.7% growth year over year.UNH's second-quarter top-line performance is expected to have been enhanced by a rise in service revenues from the Optum brand. The consensus estimate implies a 7% jump in total service revenues. Similarly, the Zacks Consensus Estimate for product revenues indicates an 11% increase. These are expected to have positioned the company for year-over-year growth in revenues in the second quarter.However, rising medical costs, as elective procedures continue to grow,are expected to have elevated UnitedHealth’s overall expenses in the quarter. The expected growth in healthcare utilization, especially in the Medicare Advantage space, might have affected margins, making an earnings beat uncertain this time around. Our model estimate for total operating costs indicates a 14.1% increase from the prior-year period.The Zacks Consensus Estimate for UNH’s medical care ratio is pegged at 88.6%, up from 85.1% in the year-ago quarter. Our estimates for medical costs and costs of products soldindicate 14.9% and 10.4% year-over-year increases, respectively.The Zacks Consensus Estimate for operating income from the Optum business segment suggests a mere 0.7% year-over-year increase. Meanwhile, the Zacks Consensus Estimate for operating income from UnitedHealthcare indicates a 30.1% year-over-year fall.UNH’s Price Performance & ValuationUnitedHealth's stock has plunged 42.2% in the year-to-date period compared with the industry’s decline of 34.3%. Its peers, such as Humana Inc. HUM and Molina Healthcare, Inc. MOH, have fallen 6.6% and 34.7%, respectively, during this time. All these stocks have underperformed the S&P 500 significantly, which has grown 7.6% during the same period.YTD Price Performance – UNH, HUM, MOH, Industry & S&P500 Image Source: Zacks Investment ResearchNow, let’s look at the value UnitedHealth offers investors at current levels.The company’s valuation still looks a bit stretched compared with the industry average, despite the massive drop in price. Currently, UNH is trading at 12.58X forward 12-month earnings, above the industry’s average of 11.58X. In comparison, Humana and Molina Healthcare are currently trading at 16.3X and 7.8X, respectively. Image Source: Zacks Investment ResearchHow Should You Play UNH Stock Now?UnitedHealth has been removed from several major Russell growth indices, including the Russell 1000 Growth and Russell 3000 Growth, as it struggles with the sharp decline in stock price and weakening growth profile. Rising medical costs, particularly in Medicare Advantage, and a surge in high-acuity patient volumes are compressing margins, and this is an industry trend. Following UNH’s lead, peers like Centene and Humana withdrew their 2025 profit outlook, while Molina Healthcare slashed its guidance.The sudden change in CEO position, a few weeks after the company pulled its annual forecast, and reputational damage from reported federal investigations have shaken investor confidence. Regulatory risks around UnitedHealth’s PBM arm, Optum Rx, also pose long-term challenges. Given these headwinds, UNH is perceived as a risky bet that investors should exit for now.7 Best Stocks for the Next 30 DaysJust released: Experts distill 7 elite stocks from the current list of 220 Zacks Rank #1 Strong Buys. They deem these tickers "Most Likely for Early Price Pops."Since 1988, the full list has beaten the market more than 2X over with an average gain of +23.5% per year. So be sure to give these hand picked 7 your immediate attention. See them now >>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 Humana Inc. (HUM): Free Stock Analysis Report Molina Healthcare, Inc (MOH): 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