JPM-Managed Care 2Q Preview Looking for Silver Linings-20250714

With sentiment remaining downbeat for MCOs, we see 2Q earnings as anopportunity for management teams to frame the recent developments (eitherpositively or negatively) after several meaningful intra-quarter updates acrossproduct lines. We believe sentiment could improve as 2026 starts to take shape;however, we think that may not come until later in the fall as investors wait for moreclarity on MA stars and Medicaid trends. Near term, the focus remains on MAtrends (we’ve continued to hear from non-UNH and MOH MCOs that trends arein line with expectations), Medicaid cost pressures and rate updates, and color onACA exchange pressures (both near term and looking to 2026 with regulatorychanges on the horizon). In our discussions, the five major themes have focused on:(1) UNH and its reinstated 2025 guidance and any preliminary 2026 commentary(see our updated estimates here), where we believe the stock can work withguidance in the range of $18.00-$20.00; (2) ELV, where commentary in late Mayreaffirmed full year guidance but highlighted 2Q pressure (see our CEO calltakeaways here), which has led to debate on if the company trims 2025 guidancein 2Q; (3) Medicaid and ACA Exchange pressures following CNC/MOHcommentary; (4) MA trend and any further commentary on 2026 bids; and (5)whether plans accounted for the changes to Part D under IRA correctly for 2025.Across the group, we believe expectations are low with the potential to see somebetter-than-feared quarters. Overall, our near-term bias remains towards CI andCVS with cleaner stories with less exposure to government insurance and largerhealthcare services businesses, where we feel comfortable that guidance isattainable. We highlight a few of the key points to watch in 2Q below: