UnitedHealth to Top Second-Quarter Earnings Views on Favorable Utilization Trends, Morgan Stanley Says
UnitedHealth Group (UNH) is likely to report second-quarter earnings above Wall Street's consensus, supported by favorable utilization trends, as managed care organizations prepare to file their financials, Morgan Stanley said in a client note emailed Tuesday.The brokerage estimates the health insurance giant to post adjusted earnings of $4.95 per share for the second quarter, compared with the consensus view of $4.85.UnitedHealth's utilization trends are seemingly favorable, which bodes well for managed care organizations heading into second-quarter earnings, Morgan Stanley said. UnitedHealth is executing well, including across its Optum Health business."We expect (UnitedHealth) will set a positive tone when it kicks off reports on July 16," the brokerage said in the note.Humana (HUM) recently affirmed its guidance, while Ardent Health's (ARDT) first-quarter core profitability jumped year-on-year despite softer seasonal volume. All that points "to a more manageable utilization environment," according to Morgan Stanley.The brokerage said artificial intelligence is an "underappreciated" earnings driver for UnitedHealth, which is investing $1.5 billion in AI to save about $1 billion in operating costs in 2026.Morgan Stanley views UnitedHealth as an "AI enabler," with Optum Insight evolving into an AI-enabled healthcare platform. The brokerage estimates AI could drive about 20% EPS upside, excluding new high-margin insight revenue streams.For 2026, Morgan Stanley projects UnitedHealth to report adjusted EPS of $18.27, while the Street is currently looking for $18.39.Morgan Stanley expects 2027 EPS of $20.96 versus the market's view for $20.94. The brokerage sees an upside of 22% to these estimates if the health insurer achieves its margin recovery strategy and moves closer to target profitability levels.Morgan Stanley raised its price target on UnitedHealth to $468 from $453, while maintaining an overweight rating on the company's stock.
