UnitedHealth Is Approaching a Pivotal Moment. Should Investors Buy the Stock Before July 29?

Key Points

• UnitedHealth Group heads into its update next week facing decidedly low expectations from investors.

• Disappointing second-quarter results from Elevance Health might not bode well for UnitedHealth Group.

• UnitedHealth Group could calm investors with new full-year guidance and details on how it will return to growth.

• 10 stocks we like better than UnitedHealth Group ›

It's been an awful, horrible, lousy year so far for UnitedHealth Group (NYSE: UNH). If I opened a thesaurus, I could easily find plenty of other apt descriptions for the healthcare giant's performance over the last seven months.

However, UnitedHealth is scheduled to report its second-quarter results in just one week -- before the market opens on July 29. This update could be a pivotal moment for the company. Should investors buy the stock before July 29?

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Low expectations

UnitedHealth Group heads into its Q2 update with decidedly low expectations. The company pulled its full-year guidance in May due to higher-than-anticipated Medicare Advantage costs, and the consensus among analysts surveyed by LSEG is for UnitedHealth to report revenue of $111.75 billion. This number is roughly 13% higher than the company's revenue in the prior-year period. Could such solid revenue growth be enough to ignite a rally for the beaten-down stock? Probably not.

Those same analysts look for UnitedHealth Group to post Q2 earnings of $4.90 per share, down nearly 28% year over year. Even the most optimistic analyst projects an earnings decline of more than 19%.

Wall Street clearly doesn't expect the Medicare Advantage issues to be resolved. UnitedHealth Group hasn't given analysts any reason to think otherwise. When the company withdrew its full-year outlook, it noted that a return to growth is expected in 2026.

Image source: Getty Images.

A potential warning sign from a peer

Any lingering investor hopes for a major positive surprise from UnitedHealth Group might have been dashed at least somewhat by the Q2 update from one of its peers: Elevance Health (NYSE: ELV) reported disappointing quarterly results on July 17.

Although Elevance beat analysts' Q2 revenue estimates, the health insurer fell well short of earnings expectations. Elevance also lowered its full-year outlook. It blamed the downward revision on "the ongoing and industrywide impact of elevated cost trends in ACA [Affordable Care Act] and Medicaid."

UnitedHealth Group won't be immune to negative pressures affecting the entire health insurance industry. The company offers plans on ACA exchanges in 30 states and served 7.57 million Medicaid members at the end of the first quarter.

Interestingly, Medicare Advantage was one of the bright spots for Elevance in its Q2 update. That's unlikely to be true for UnitedHealth in its upcoming results.

Public relations problems

UnitedHealth Group's dismal stock performance isn't solely because of its financial challenges. The company has also taken hits in the news media.

On May 14, The Wall Street Journal cited unnamed sources and reported that the U.S. Department of Justice had launched a criminal investigation into UnitedHealth's Medicare Advantage business. The company quickly responded that it had not been notified by the DOJ about any investigation and said, "We stand by the integrity of our Medicare Advantage program."

The Wall Street Journal ran another negative article about UnitedHealth Group's Medicare Advantage operations on July 9. UnitedHealth again responded publicly, stating that the article relied on "incomplete data, a predetermined narrative and a flawed understanding of how the Medicare Advantage program works." The company also noted that "after more than a decade of a similar Department of Justice challenge to our Medicare Advantage business, the Special Master concluded there was no evidence to support the claims that we were overpaid or engaged in any wrongdoing."

On another negative note, The Guardian ran a story on May 21 that claimed UnitedHealth tried to influence care decisions made by skilled nursing facilities. UnitedHealth rebutted the newspaper's allegations in a public statement. It pointed to the multiyear DOJ investigation in which the government ultimately opted not to pursue any actions against the company.

Could UnitedHealth Group put to rest the concerns raised by these media outlets when the company provides its Q2 update next week? I doubt it.

Buy UnitedHealth Group stock before July 29?

It's certainly possible that UnitedHealth Group might deliver Q2 results that are much better than expected. However, I wouldn't count on it. There is at least one thing the company could do in its Q2 update that would calm investors' fears to some extent, though: Provide updated full-year guidance and details on how it will return to growth next year.

To be clear, I'm not sure that this would be enough to spark a rebound for UnitedHealth's languishing stock. But it could at least help investors look past the company's current problems.

I don't know if UnitedHealth Group will have any news in its Q2 update that makes the stock a no-brainer buy before July 29. No one does. However, I can think of one compelling reason to buy the stock sooner rather than later: Its valuation is attractive relative to its long-term growth prospects. Awful, horrible, lousy performances can present awesome, fabulous, magnificent buying opportunities for forward-looking investors.

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Keith Speights has no position in any of the stocks mentioned. The Motley Fool recommends UnitedHealth Group. The Motley Fool has a disclosure policy.