To The Moon

$UnitedHealth(UNH)$

UnitedHealth Group (NYSE: UNH), the largest U.S. health insurer and one of Warren Buffett’s enduring portfolio holdings, is set to report its latest quarterly earnings on Tuesday. As investors brace for the results, all eyes are on whether the company can reaffirm its reputation as a defensive giant in a volatile healthcare landscape. With shares rebounding more than 40% from August lows, confidence is returning — but the question remains: is UnitedHealth still undervalued, and can it continue to deliver the kind of long-term stability that made it a Berkshire Hathaway favorite?

A Comeback Story: From August Lows to Renewed Strength

UnitedHealth’s stock performance over the past few months has been a story of sharp recovery. After sliding to multi-year lows earlier in 2025 amid sector-wide uncertainty over reimbursement rates and higher medical utilization, the stock has since rebounded strongly. Investors are finding renewed optimism as the company’s diversified business model — combining health insurance (UnitedHealthcare) with high-margin health services (Optum) — continues to prove resilient even under inflationary pressure.

In mid-October, Goldman Sachs initiated coverage on UNH with a “Buy” rating and a $406 price target, reflecting nearly 15% upside potential from current levels. The investment bank cited UnitedHealth’s balanced exposure to risk-bearing insurance and fee-based care delivery as a key advantage, especially as the healthcare sector faces ongoing regulatory and inflationary headwinds.

Earnings Preview: What to Watch

As UnitedHealth prepares to release results, three metrics will likely dominate investor attention: membership growth, medical cost trends, and Optum’s performance.

1. Membership Growth: The company’s membership base is one of the largest in the U.S., and growth in its Medicare Advantage and employer-sponsored plans remains a core earnings driver. Analysts expect modest net additions this quarter as the company benefits from a steady aging population and strong retention rates. However, competitive pricing in Medicare markets could slightly temper overall expansion.

2. Medical Cost Ratio: UnitedHealth’s medical care ratio (MCR) — or the percentage of premiums spent on healthcare services — is a critical metric that indicates how efficiently it’s managing costs amid rising medical inflation. With hospital admissions and outpatient visits trending higher post-pandemic, there’s pressure on insurers to control spending. Any uptick in the MCR beyond expectations could weigh on margins and investor sentiment.

3. Optum’s Performance: Optum, UnitedHealth’s data analytics, pharmacy benefit management, and health services arm, now accounts for nearly half of overall revenue and a growing share of profits. The segment’s integration of care delivery, pharmacy services, and technology has been the key engine behind UnitedHealth’s long-term growth. Analysts will look for continued double-digit revenue expansion from Optum, particularly in its Optum Health and Optum Insight divisions.

Inflation and Utilization Risks: The Market’s Key Concern

One of the biggest investor concerns heading into earnings is medical inflation — the rising cost of drugs, treatments, and labor across the healthcare sector. Hospital staffing shortages have pushed wage costs higher, while increased procedure volumes post-COVID have pressured utilization rates.

For UnitedHealth, higher-than-expected utilization translates to higher claims payouts, which directly impacts the company’s profit margins. However, the insurer’s scale and diversified model give it tools to absorb such cost pressures more effectively than peers. Its actuarial precision and broad provider network allow for better pricing power and contract management, providing a degree of insulation against industry cost shocks.

Fundamentals: Strong Cash Flow and Dividend Consistency

From a balance sheet perspective, UnitedHealth remains in solid shape. The company generated over $27 billion in free cash flow last year, supporting both reinvestment and shareholder returns. UnitedHealth’s dividend track record is one of the most dependable in the healthcare sector — the company has raised its payout for 14 consecutive years, reflecting both strong profitability and confidence in long-term cash generation.

With an annualized dividend yield near 1.5%, the stock may not appear high-yield on the surface, but its consistent dividend growth rate — averaging around 14% per year — makes it an appealing long-term income compounder. Moreover, UnitedHealth continues to allocate capital efficiently, with share buybacks and acquisitions that expand its integrated healthcare ecosystem.

Valuation: Still Room to Run?

At current levels around $355–$365 per share, UnitedHealth trades at roughly 18–19x forward earnings, slightly below its five-year historical average of 21x. For a company with steady double-digit EPS growth and resilient margins, that multiple looks attractive, particularly compared to peers in both managed care and healthcare technology.

If UnitedHealth delivers on earnings expectations and guides confidently for 2026, the stock could reasonably revisit the $400–$420 range, aligning with Goldman Sachs’ upside scenario. That would represent a return to pre-correction valuation levels seen before the mid-2025 selloff.

Long-term investors, including Buffett’s Berkshire Hathaway, have historically treated UnitedHealth as a core defensive holding — not for explosive gains, but for stable compounding through cycles. Its diversified revenue base and durable moat in healthcare administration make it one of the few mega-cap stocks capable of consistent mid-teens EPS growth despite regulatory noise.

The Buffett Factor: Enduring Confidence

Warren Buffett’s enduring confidence in UnitedHealth reflects his preference for companies with predictable earnings, strong cash generation, and essential services. Healthcare, much like consumer staples or insurance, tends to hold up even during economic slowdowns. UnitedHealth’s steady growth model and entrenched position in America’s healthcare infrastructure make it a quintessential Buffett-style holding.

The company’s strategic combination of risk-bearing insurance operations and fee-based services through Optum provides it with a unique advantage: revenue diversity that cushions it against industry shocks. This balance has allowed UnitedHealth to outperform peers like Cigna and CVS Health over the past decade — both in terms of share price performance and return on equity.

Verdict: A Long-Term Buy, With an Entry Zone Around $340–$355

For investors looking for long-term stability and growth in the healthcare sector, UnitedHealth remains a compelling choice. The recent rally may limit near-term upside, but valuation still appears reasonable given its growth profile and strong fundamentals.

• Entry Zone: $340–$355

• 12-Month Target Range: $400–$420

• Investment Verdict: Buy (Long-Term)

Earnings volatility in the coming quarter could offer buying opportunities, especially if short-term cost concerns trigger dips. Over a multi-year horizon, however, UnitedHealth’s integrated model and predictable cash flow profile make it a high-quality compounder worthy of patient accumulation.

Key Takeaways

1. Strong Recovery: UNH has rebounded 40% from August lows, regaining investor confidence.

2. Earnings Focus: Membership growth, medical loss ratio, and Optum performance will be critical watchpoints.

3. Inflation Challenge: Rising medical and drug costs could pressure margins, but UNH’s scale offers resilience.

4. Financial Strength: Robust free cash flow and consistent dividend growth underscore long-term stability.

5. Attractive Valuation: Trading below historical multiples, UNH still offers upside toward $400+.

6. Buffett’s Confidence: Enduring ownership by Berkshire Hathaway highlights its status as a defensive compounder.

Final Thought: As healthcare costs rise and economic uncertainties persist, UnitedHealth Group remains one of the few large-cap companies capable of delivering reliable growth in both good and bad times. If upcoming earnings reaffirm cost discipline and Optum’s momentum, UNH could once again prove why Buffett favors businesses that keep “earning more every year” — no matter what the market does.