UnitedHealth Recovers Its Rhythm Before Q3 Earnings: Time to Buy?

Core Viewpoint - UnitedHealth Group is expected to report third-quarter 2025 results on October 28, 2025, with earnings estimated at $2.80 per share and revenues of $113.38 billion, reflecting a year-over-year revenue growth of 12.5% despite a significant decline in earnings per share [1][2][3]. Financial Performance - Third-quarter earnings estimates have decreased by 4 cents, indicating a 60.8% decline from the previous year [2]. - The Zacks Consensus Estimate for total revenues for the current year is $448.46 billion, representing a 12% increase year-over-year, while earnings per share are projected to drop by 41.6% [3]. Earnings Prediction - The model does not predict a definitive earnings beat for UnitedHealth this quarter, with an Earnings ESP of -0.81% and a Zacks Rank of 2 (Buy) [5]. - The company has beaten earnings estimates in two of the last four quarters, with an average surprise of -3.3% [4]. Revenue Drivers - Premium and membership growth in UnitedHealthcare and service gains from Optum are expected to enhance results, with premium revenues projected to grow by 15.1% year-over-year [8][9]. - Total domestic commercial customers are expected to grow by 0.9%, with Medicare Advantage members increasing by 8% and Medicaid memberships by 1.9% [10]. Cost and Margin Pressures - Rising medical costs and increased overall expenses are anticipated to impact margins negatively, with total operating costs expected to rise by 18% year-over-year [12]. - The medical care ratio is estimated at 90.82%, up from 85.2% in the previous year, indicating higher medical costs [13]. Stock Performance and Valuation - UnitedHealth's stock has increased by 28.2% over the past three months, outperforming the industry and the S&P 500 [14]. - The stock is currently trading at 21 times forward 12-month earnings, above the industry average of 16.65 times, reflecting investor confidence in the company's long-term stability [16]. Strategic Positioning - Despite short-term challenges, UnitedHealth's long-term fundamentals remain strong, supported by its scale, diversified portfolio, and strategic positioning in the managed care industry [18]. - Management's proactive measures, including disciplined cost control and operational optimization, aim to protect profitability and maintain financial flexibility [19]. Investment Outlook - The company is well-positioned to navigate current challenges, with strong execution and expanding memberships offering a compelling opportunity for investors seeking steady growth and stability [21].