UnitedHealth Group (NYSE:UNH) stock just cannot seem to catch a break. The company’s share price – already down in the dumps this year – suffered another setback earlier this month when health insurer Centene pulled its 2025 earnings guidance due to higher-than-expected costs among Medicaid beneficiaries.
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That move underscored a broader issue rippling through the healthcare sector: escalating costs. UnitedHealth itself is no stranger to this trend. As a quick reminder, it cited unexpectedly high medical expenses among Medicare Advantage beneficiaries as a key reason for withdrawing its full-year guidance back in May.
Given the industry-wide pain, it’s no surprise that investors are hoping the upcoming Q2 earnings report, due July 29, might offer some signs of relief.
Unfortunately, that may be wishful thinking. One top investor, known by the pseudonym Quad 7 Capital, anticipates the earnings release could be “rough.” Still, despite a host of negative signals, the investor also sees potential silver linings that shouldn’t be overlooked.
“Headwinds galore from regulatory scrutiny, Medicare Advantage costs, and management changes, but insiders are buying, and the valuation is historically cheap,” explains Quad 7, who is among the top 2% of TipRanks’ stock pros.
Specifically, the investor suspects that Medicare Advantage costs likely remained a drag during the second quarter, particularly early on. But the key question is whether those costs have begun to stabilize – and how the company plans to manage them going forward.
In addition, Quad 7 will be closely watching for any updates to guidance on the upcoming call, noting it’s essentially a coin toss at this point. Any clarity on that front could significantly shape investor sentiment.
Meanwhile, the relentless stream of bad news has driven UNH’s valuation down to a level Quad 7 considers compelling. Despite the recent turmoil, the company continues to generate “strong” free cash flows and maintain a solid return on equity – two signs that the core business remains fundamentally sound.
“Make no mistake, this is a profitable business even with all of the pain… We are looking for an inflection from this Q2 print,” Quad 7 concludes, assigning a Buy rating to UNH stock. (To watch Quad 7 Capital’s track record, click here)
Wall Street analysts largely agree. With 18 Buy ratings far outnumbering 7 Holds and just 1 Sell, UNH earns a Moderate Buy consensus rating. The average price target of $357.14 implies potential upside of ~22%. (See UNH stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured investor. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.