This year has been quite challenging and disappointing for UnitedHealth Group (UNH) so far. A quick look in a dictionary would reveal many more fitting words to describe their seven-month long struggle in the healthcare sector.
On the other hand, UnitedHealth will release its second-quarter earnings in exactly a week’s time, prior to market opening on July 29. This upcoming report may prove crucial for the company. Is it advisable for investors to purchase shares before July 29?
Low expectations
As an observer, I approach UnitedHealth Group’s Q2 update with muted anticipation, given the lowered expectations following the company’s withdrawal of its full-year guidance in May due to unexpectedly high Medicare Advantage costs. Analysts surveyed by LSEG predict a revenue figure of $111.75 billion for this quarter, representing a 13% increase over the same period last year. However, despite this robust revenue growth, it seems unlikely that it will spark a rebound for the currently downtrodden stock.
The very same financial experts anticipate UnitedHealth Group to report a quarter-two earnings of approximately $4.90 per share, marking a decrease of nearly 28% compared to the same period last year. In fact, the most positive outlook among these analysts still predicts an earnings drop exceeding 19%.
It appears that Wall Street has little optimism about resolving the Medicare Advantage issues, and UnitedHealth Group isn’t providing any indications to contradict this view. In fact, when the company withdrew its annual forecast, it indicated that growth might not resume until 2026.
A potential warning sign from a peer
It appears that any remaining optimism among investors regarding a significant upside surprise from UnitedHealth Group might have been tempered slightly following the Q2 report by one of its competitors, Elevance Health (ELV), which disclosed underwhelming quarterly figures on July 17.
Despite surpassing analysts’ predictions for Q2 revenue, Elevance missed earnings targets significantly. Additionally, the company adjusted its full-year projection downward. This adjustment was attributed to “the persistent and broad effect of rising costs in ACA [Affordable Care Act] and Medicaid” on the industry.
I, as an outside observer, notice that UnitedHealth Group may not escape the adverse pressures impacting the broader health insurance sector. This conglomerate offers plans on ACA exchanges across 30 states and had approximately 7.57 million Medicaid members at the end of the first quarter last year.
It’s worth noting that Medicare Advantage was a notable success for Elevance during their Q2 report. However, it seems unlikely that UnitedHealth will experience similar positive results when they announce their own Q2 findings.
Public relations problems
UnitedHealth Group’s poor stock performance isn’t only due to its financial issues, but it’s also been impacted by negative coverage in the media.
On May 14th, according to anonymous sources, The Wall Street Journal announced that the U.S. Department of Justice initiated a criminal probe into UnitedHealth’s Medicare Advantage sector. The firm promptly denied any knowledge of such an investigation and affirmed their confidence in the honesty of their Medicare Advantage program, stating, “We uphold the integrity of our Medicare Advantage operations.
On July 9th, another critical piece about UnitedHealth Group’s Medicare Advantage operations appeared in The Wall Street Journal. Once more, UnitedHealth publicly countered these allegations, asserting that the article was based on “partial information, a preconceived storyline, and an incorrect grasp of how the Medicare Advantage program functions.” The company also emphasized that “following over a decade of similar investigations by the Department of Justice into our Medicare Advantage business, the Special Master found no proof to back up the accusations that we were overcompensated or involved in any misconduct.
In another unfavorable report, The Guardian published an article on May 21 suggesting that UnitedHealth had attempted to control care choices made by skilled nursing facilities. However, UnitedHealth disputed these accusations with a public statement. They highlighted a prolonged DOJ investigation during which the authorities decided not to take any further action against the company.
As an outside observer, I wonder if UnitedHealth Group can effectively address the lingering doubts brought up by various media outlets when they present their Q2 report next week. However, I’m not optimistic that this will be the case.
Buy UnitedHealth Group stock before July 29?
It’s plausible that UnitedHealth Group may outperform expectations in their Q2 results, but I wouldn’t bet on it. One action they could take in their Q2 report to alleviate investor concerns somewhat is by updating their full-year forecast and sharing strategies for resuming growth next year.
It’s uncertain if this alone will revive UnitedHealth’s struggling stocks. However, it might encourage investors to focus on other aspects of the company aside from its current difficulties.
As an eager investor, I’m unsure if UnitedHealth Group will reveal groundbreaking news in their Q2 update that would instantly make it a must-buy before July 29. But here’s one persuasive reason to consider purchasing the stock early: Its current valuation appears appealing compared to its long-term growth potential. Subpar performances can often create fantastic opportunities for forward-thinking investors.
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2025-07-22 13:20