UnitedHealth Reaffirms 2025 EPS Guidance: Time to Buy or Wait?

Core Viewpoint - UnitedHealth Group Incorporated (UNH) is reaffirming its 2025 adjusted EPS outlook despite the modestly dilutive impact of the recent Amedisys acquisition, which closed in August [1][10]. Financial Outlook - UnitedHealth projected adjusted EPS of at least $16 for 2025, with revenues between $445.5 billion and $448 billion, amidst rising medical costs affecting margins across the industry [2]. - Analyst sentiment has been negative, with two downward revisions to earnings estimates for 2025 and 2026, leading to a projected EPS decline of 41.4% to $16.21, despite expected revenue growth of over 12% year over year [3]. - The company has missed earnings estimates in two of the last four quarters, with an average earnings surprise of negative 3.3% [4]. Challenges and Risks - UnitedHealth faces multiple hurdles, including removal from major Russell growth indices, increasing high-acuity care volumes, worsening Medicare Advantage dynamics, and a rising medical loss ratio, which increased from 83.2% in 2023 to 89.4% in Q2 2025 [5]. - Regulatory and legal issues complicate the situation, with ongoing probes from the Justice Department regarding Medicare billing practices and reimbursement policies [6]. - The company extended billions in temporary loans to healthcare providers affected by a cyberattack, raising concerns about aggressive repayment stances that may strain financially fragile hospitals [7]. Stock Performance - UNH shares have declined 36.7% year to date, underperforming the industry average decline of 29.5%, while the S&P 500 has increased by 10.8% [8]. - Despite the price drop, UNH trades at a forward P/E ratio of 18.72X, above the industry average of 15.23X, while competitors Molina Healthcare and Centene trade at lower multiples [11]. Long-Term Positioning - UnitedHealth maintains a strong position in the U.S. healthcare sector, serving 50.1 million people as of June 30, 2025, with growth driven by self-funded commercial plans [13]. - Confidence in the company was bolstered by Berkshire Hathaway's $1.57 billion purchase of over 5 million shares, leading to increased institutional and retail investor interest [14]. - Potential tailwinds include expected Medicare Advantage rate hikes in 2026 and the company's efforts to leverage AI and digital tools to enhance efficiency and reduce costs [15]. Conclusion - While UnitedHealth remains a key player in U.S. healthcare, its near-term outlook is challenged by rising medical costs, regulatory scrutiny, and unfavorable estimate revisions, resulting in a significant stock price decline and premium valuation compared to peers [17]. - The stock carries a Zacks Rank 5 (Strong Sell), indicating a cautious approach for investors at this time [18].