UnitedHealth Earnings Preview: Is the Worst Over For UNH?

UnitedHealth Group Incorporated (UNH) is set to release its earnings report this morning, before the market opens, a crucial moment for a stock that has seen significant turbulence this year. Trading just shy of $369 in today's pre-market, UNH is down a substantial 27.48% year-to-date, although has moved 6.13% higher in the past month.

Analysts project that UnitedHealth will report EPS of $2.81, significantly down from $7.15 a year ago, indicating a sharp decline in profitability for the upcoming quarter. Revenue is expected to reach $113.06 billion, representing a strong 12.14% year-over-year increase, suggesting continued growth in top-line sales despite the drop in earnings. Overall, the estimates imply that while UnitedHealth is expanding its revenue base, it may face margin pressures or extraordinary items that are weighing heavily on net income.

The upcoming earnings call will be heavily scrutinized. Analysts will be laser-focused on management's commentary regarding medical cost trends, particularly within its Medicare Advantage business, confirmation of the effect of the recent Amedisys acquisition, and any further updates regarding the ongoing DOJ investigation. The market is pricing in a degree of uncertainty, and a strong showing is needed to begin to restore market confidence.

Recent months have been tumultuous for UnitedHealth. The unexpected resignation of CEO Andrew Witty in May, coupled with the suspension of the 2025 financial outlook due to rising medical expenses, sent shockwaves through the market. The return of former CEO Stephen Hemsley aimed to provide stability, but the initial damage was significant, triggering a double digit percentage stock decline.

Adding to the pressure, the U.S. Department of Justice (DOJ) is investigating UnitedHealth's Medicare billing practices, specifically allegations of “upcoding”—inflating diagnoses to secure higher reimbursements. This probe has further eroded market confidence, contributing to a steep decline from the stock's 52-week high. The overhang of potential fines and reputational damage weighs heavily on the stock.

However, not all news has been negative. Warren Buffett's Berkshire Hathaway disclosed a new $1.57 billion stake in UnitedHealth in August, a move that triggered an immediate 8.2% surge in the stock price. This endorsement from a legendary investor provided a much-needed vote of confidence, suggesting that Berkshire sees long-term value in UNH despite its current challenges. Furthermore, Davenport & Company recently increased its holdings in UNH, signaling institutional belief in the company's prospects.

UnitedHealth's strategic moves, such as the acquisition of Amedisys and the multi-year agreement with Memorial Sloan Kettering Cancer Center, also offer potential catalysts for future growth. While the Amedisys deal has faced regulatory scrutiny and operational headwinds, including the cyberattack on Change Healthcare, it expands UnitedHealth's reach in the critical home health and hospice care sectors. The agreement with Memorial Sloan Kettering ensures continued access to high-quality cancer care for UnitedHealthcare members, a positive development for both patients and the company's reputation.