Why Is UnitedHealth (UNH) Up 14.2% Since Last Earnings Report?

Core Viewpoint - UnitedHealth Group's recent earnings report showed a decline in adjusted EPS and operating earnings, primarily due to rising medical costs, despite a year-over-year revenue increase. The stock has outperformed the S&P 500 by 14.2% since the last earnings report, but analysts are concerned about the sustainability of this positive trend leading up to the next earnings release [1][2]. Financial Performance - UnitedHealth reported Q2 2025 adjusted EPS of $4.08, missing the Zacks Consensus Estimate of $4.84, and reflecting a 40% decline year over year [3]. - Revenues increased by 12.9% year over year to $111.6 billion, slightly beating the consensus mark by 0.1% [3]. - The company's premium revenue rose to $87.9 billion from $76.9 billion a year ago, surpassing the consensus estimate by 0.8% [5]. - Medical care ratio (MCR) was 89.4%, worsening by 430 basis points from the previous year and exceeding the consensus estimate of 88.6% [6]. - Total operating costs reached $106.5 billion, a 17% increase year over year, driven by higher medical costs [7]. Business Segment Performance - UnitedHealthcare's revenues grew 17% year over year to $86.1 billion, driven by domestic commercial membership growth, beating the consensus estimate of $84.8 billion [9]. - Optum's revenues were $67.2 billion, a 6.8% year-over-year increase, although it fell short of the consensus mark of $67.5 billion [10]. - Medical membership reached 50.1 million, a 2.1% increase year over year, but missed the consensus estimate of 50.3 million [11]. Financial Position - As of June 30, 2025, UnitedHealth had cash and short-term investments of $32 billion, up from $29.1 billion at the end of 2024 [13]. - Total assets increased to $308.6 billion from $298.3 billion at the end of 2024 [13]. - Long-term debt rose to $73.5 billion from $72.4 billion at the end of 2024 [13]. - Total equity increased to $100.5 billion from $98.3 billion at the end of 2024 [14]. - Operating cash flows surged to $7.2 billion in Q2 from $2.2 billion a year ago [14]. Capital Deployment - UnitedHealth returned $4.5 billion to shareholders through share repurchases and dividends in Q2, with a 5% increase in the quarterly dividend rate announced in June [15]. 2025 Outlook - Management revised the adjusted net EPS projection for 2025 to at least $16, down from a previous range of $26-$26.50, while net earnings are expected to be at least $14.6 billion [16]. - Revenue projections for 2025 are now between $445.5 billion and $448 billion, an increase from $400.3 billion in 2024 [16]. - Operating cash flows are projected to be $16 billion, down from $24.2 billion in 2024 [16]. Estimate Trends - There has been a downward trend in estimates, with the consensus estimate shifting down by 41.69% recently [17]. - UnitedHealth currently holds a Zacks Rank 5 (Strong Sell), indicating expectations of below-average returns in the coming months [19]. Industry Comparison - UnitedHealth is part of the Zacks Medical - HMOs industry, where competitor Centene reported a revenue increase of 22.4% year over year, highlighting contrasting performance within the sector [20].