UNH's strong quarters, 2026 adjusted EPS guidance raised to at least $20.50, MCR down to 88.4% and operating margin up to 5.8% show its transformation paying off. Cautiously bullish: worst may be over, but expect only a slow rise over two weeks to 400 to 405 resistance, not a strong move to $600.

Let's focus on UnitedHealth 's annual chart . It has managed to recover its position after that decline earlier in the year. It has delivered three consecutive strong quarterly earnings reports while successfully continuing its transformation plans .

We have retreated from the year's highs, but we were actually among the biggest gainers in the S&P 500 index before the market opened, but the situation has changed now. We have decreased by 6 tenths of a percent.

It was also helping the Dow this morning, but not as much as I mentioned. We have moved into the negative range.

United was considered the clear winner, at least before the market opened. But as you said, we have lost a lot of that strength. It appears that there is still plenty of evidence that this broader shift is beginning to bear fruit.

This was frankly a story of margins and financial guidelines. Revenues are still relatively slow, but to review what has actually worked, there have been much better-than-expected earnings results.

We saw adjusted earnings per share of $4.69. It is much higher than expected. Financial guidance has been raised again. They have raised their adjusted earnings forecast for 2026 to at least $20.50.

This is significantly higher than the previous range of $ 19.50 to $20 per share. Medical cost trends have improved . We saw the Medicare Retention Rate (MCR) drop to 88.4% from 89.9% last year.

That was also better than expected , indicating stronger profitability and better cost control. The margins have recovered significantly. We saw operating margins expand to 5.8% from just around 3.8% last year, again indicating further evidence of these transformation efforts .

Both of their main companies also exceeded expectations. We saw United Healthcare and Optum exceed operating profit expectations across the board. They cited investment in artificial intelligence, as well as value-based care, pricing discipline, and exiting some unprofitable contracts that help stabilize their overall profitability.

However, revenue fell by about 4 tenths of a percent year-on-year, representing a rare contraction in the company's revenue. Membership numbers also continue to shrink. We saw that they ended the quarter with 48.3 million members.

That was less than in previous years, as they were exiting those unprofitable or less profitable businesses. Insurance revenues also declined by about 0.8% compared to last year, but Optom's growth remains relatively uneven.

One of the main concerns is that medical costs remain high. The administration stated that healthcare utilization and specialty drug costs remain above historical averages, even if trends improved during the quarter.

Part of the margin improvement also came from more favorable development of reserves. The quarter benefited from positive reserve adjustments of approximately 610 million, which many may see as less repeatable and less organic in terms of overall margin improvements.

Therefore, the main debate was about whether medical costs would remain high and continue to put pressure on their profit margins . They actually showed the exact opposite. Medical costs improved, margins expanded, and profits exceeded expectations by a significant margin.

I think the pessimists are pointing to further trends in declining membership and essentially stable revenue growth . However, at the moment the focus seems to be a little more on the continued margin recovery and future earnings strength.

The raised outlook is also a key and important conclusion. Although there are slow trends to note, I think the initial reaction was logical for a company operating in a challenging and government-intervention-prone sector that is still the largest exporter of private healthcare, so it is an important indicator of broader healthcare trends.

Modest moves towards the downside , but I would say this was a strong report for a company proving its transformation is starting to pay off, Sam.

Yes, we are certainly seeing the fruits of their efforts, and I think it is really important that the Medical Cost Ratio ( MCR), as you mentioned, has been something that analysts have been focusing on very closely, and we have clearly seen some improvement there.

That's interesting, Tim. I mean, it hasn't been that long since this company's stock was worth $600. We have been able to recover some of the gains thanks to the strength of the last three quarterly reports.

So, what do you think of the movement we are seeing now? We've turned negative, could you explain a business deal to us as an example?

I think we see the stock facing an upper resistance zone , which is very important just above the 400 level, at around 405. If you look at the long- term chart, you will find that it has reached that level several times, but has had difficulty surpassing it.

Therefore, I certainly believe that today's profits were very good across the board. It may have been a little lower in some aspects, but it's very good overall. We saw the stock heading towards 400 at the start of the day, and now it's falling back to this level.

I think we will see a return to around the 400 to 405 level sometime in the coming weeks. Therefore, I am taking a cautiously bullish position, buying the spread of call options between 400 and 405 for the end of October, which is the 30th of the month, for definitely less than two dollars .

I am impressed with the risk-reward if we see that expected rise towards the 405 level. We could also sell short-term call option spreads against that to further reduce the cost of the trade.

Therefore, I don't think UNH stock will strongly head towards that record high of 600. However, I think the worst may be over for it going forward. Therefore, I think a slow rise over the next two weeks is possible, especially given the fact that we are starting to see some AI stocks being negatively affected.

Cash flow is being transferred to stocks with lower beta and lower valuations, such as UNH, which, as I mentioned, has outperformed in earnings for three consecutive quarters, while the stock has remained sideways during that period.

Therefore, the stock became fairly cheap in terms of valuation as well.