Testing a rebound

Although megacap tech stocks will likely capture many of the earnings-related headlines over the next couple of weeks, there are no end of compelling stories flying under the radar—including that of health insurer UnitedHealth (UNH).

The company, which is scheduled to release its numbers on October 28, has seen its stock fall to a five-year low this year, but also mount its biggest three-month rally in more than two years.

The stock, which hit a record high of $625.25 in November 2024, is still down nearly 28% this year, thanks mostly to a series of sharp down moves that more than dropped shares by 53% the course of 20 trading days in April and May:

Shares consolidated for a couple of months after hitting their mid-May low before slipping below $240 at the beginning of August. Since then, however, UNH has climbed nearly 54%, a rally that was highlighted in its early days by news that Warren Buffet had taken a stake in the company.

Next Tuesday’s earnings announcement will be UNH’s first since the stock pivoted to the upside in August. The chart below shows UNH’s earnings-day price moves dating back to 2021. Although the April 2025 earnings sell-off was an anomaly in terms of size, it wasn’t in terms of direction—it marked the stock’s fourth decline of the past six announcements:

The final (purple) column shows the current market-based estimate for UNH’s upcoming earnings move: It’s important to remember that this figure (+/-5.73% on Tuesday), which is derived from options implied volatility, is an estimate of how much the market expects the stock to move, not whether it will move up or down. In the chart, the green and red columns next to the purple estimate columns show how much the stock actually moved, up or down, respectively, after each of the announcements.

The following chart shows UNH in the “Earnings Previews” section of Morgan Stanley & Co.’s new suite of earnings-related analysis, which also includes an announcement calendar, earnings reactions, and earnings surprises:

The screen offers a quick summary of what Morgan Stanley & Co.’s analysts see as each stock’s key performance indicator (KPI) for this earnings release, the expected direction of that KPI’s “surprise,” and whether the announcement is likely to result in an upward or downward earnings revision. In this case, the analysts cite the company’s MLR (medical loss ratio, the company’s spending on healthcare services vs. its administrative costs and profits) as a notable KPI for this earnings release.

There’s always a high level of uncertainty surrounding earnings, but combining quantitative and qualitative analysis can offer a more-rounded perspective—an understanding not just of how much a stock may move, but what may be driving it.

Market Mover Update: LKQ (LKQ) rallied for the sixth day of the past seven on Tuesday. The stock is now up nearly 7% since October 10, although it’s still below the lower strike price of the bull call spread discussed in “Targeting with options.”

Gold’s recent volatility jumped to a new level on Tuesday. A day after December futures (GCZ5) rallied more than 3.5% to a new record high, prices fell more than 5.5% to $4,109.10 yesterday—the market’s biggest one-day loss since 2020.

Today’s earnings include: Alcoa (AA), Edwards Lifesciences (EW), GE Vernova (GEV), Lam Research (LRCX), Medpace (MEDP), O'Reilly Automotive (ORLY), AT&T (T), Tesla (TSLA).

Today’s numbers include: mortgage applications (7 a.m.), Atlanta Fed Business Inflation Expectations (10 a.m.), EIA Petroleum Status Report (10:30 a.m.).

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