UnitedHealth vs. Humana: Which Healthcare Stock Should You Buy Now?

Core Viewpoint - UnitedHealth Group is positioned as the more attractive investment compared to Humana, driven by its diversified revenue streams, consistent earnings performance, and strategic focus on technology and innovation [21][22]. Group 1: UnitedHealth Overview - UnitedHealth has a market capitalization of $480 billion and operates through two main segments: UnitedHealthcare and Optum, providing health benefits and data-driven healthcare services [3]. - The company serves 50.68 million people as of December 31, 2024, and has consistently exceeded earnings expectations, with an average surprise of 2.5% over the past four quarters [4]. - Financially, UnitedHealth ended 2024 with $29.1 billion in cash and short-term investments, with a total debt-to-capital ratio of 43.9% [5]. - In 2024, UnitedHealth returned $16 billion to shareholders through share repurchases and dividends, with a dividend yield of 1.52% [6]. - Strategic investments in technology and value-based care through Optum position UnitedHealth as a leader in healthcare innovation [7]. Group 2: Humana Overview - Humana has a market capitalization of $30.7 billion and focuses heavily on government-sponsored programs, particularly Medicare Advantage (MA), covering 16.3 million members as of December 31, 2024 [8]. - The company has shown earnings strength, surpassing analyst estimates with an average surprise of 15.4% over the last four quarters [9]. - However, Humana faces challenges, including a profit warning due to high medical costs, with a benefits expense ratio rising to 89.8% in 2024 [10]. - Humana's lack of diversification and reliance on MA make it more vulnerable to policy changes and demographic shifts [11]. Group 3: Comparative Analysis - The Zacks Consensus Estimate for UnitedHealth's 2025 sales and EPS indicates a year-over-year increase of 12.7% and 7.5%, respectively, while Humana's estimates are only 8% and 0.9% [13][14]. - In terms of valuation, UnitedHealth trades at 18X forward 12-month earnings, slightly less than Humana's 18.27X, both above the industry average of 15.55X [16]. - Over the past month, UnitedHealth's shares have outperformed Humana, the industry, and the S&P 500 Index [18]. Group 4: Conclusion - UnitedHealth is deemed the better investment opportunity due to its diversified business model and robust performance, while Humana's recent challenges and higher valuation make it a less attractive option [21][22].