What Happened?
A number of stocks fell in the afternoon session after industry bellwether UnitedHealth Group (UNH) slashed its 2025 profit forecast after reporting a significant surge in medical costs, sending shockwaves across the health insurance sector.
The core of the issue stems from an “unprecedented medical cost trend environment,” particularly within the Medicare Advantage market, which are privately run versions of the federal health insurance program. UnitedHealth, the largest provider in this space, now expects these costs to rise by 7.5% in 2025, a significant jump from its earlier 5% projection, with the potential to accelerate to almost 10% in 2026. In response, the insurer announced it will drop plans covering over 600,000 people. The company's lowered earnings forecast has raised investor concerns that these surging costs and utilization rates are an industry-wide problem, impacting the profitability of other carriers as well.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks.
Among others, the following stocks were impacted:
- Health Insurance Providers company Oscar Health (NYSE: OSCR) fell 4.3%. Is now the time to buy Oscar Health? Access our full analysis report here, it’s free.
- Outpatient & Specialty Care company Surgery Partners (NASDAQ: SGRY) fell 3.1%. Is now the time to buy Surgery Partners? Access our full analysis report here, it’s free.
- Therapeutics company Moderna (NASDAQ: MRNA) fell 4.9%. Is now the time to buy Moderna? Access our full analysis report here, it’s free.
- Health Insurance Providers company Molina Healthcare (NYSE: MOH) fell 3.2%. Is now the time to buy Molina Healthcare? Access our full analysis report here, it’s free.
- Drug Development Inputs & Services company Fortrea (NASDAQ: FTRE) fell 7.9%. Is now the time to buy Fortrea? Access our full analysis report here, it’s free.
Zooming In On Fortrea (FTRE)
Fortrea’s shares are extremely volatile and have had 55 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 6 days ago when the stock gained 6.5% on the news that a new trade agreement between the United States and Japan spurred a broad market rally.
The positive sentiment swept across markets after it was announced the U.S. and Japan had reached a new trade deal. The agreement included a 15% tariff on Japanese goods imported into the U.S. and a commitment from Japan to invest $550 billion in the U.S. and open its markets to American cars and agricultural products. This development boosted investor confidence and contributed to a widespread rally, lifting stocks across many sectors. The Dow Jones Industrial Average and the S&P 500 both posted gains, creating a favorable environment that likely benefited individual stocks.
Fortrea is down 66.1% since the beginning of the year, and at $6.33 per share, it is trading 77.3% below its 52-week high of $27.88 from July 2024. Investors who bought $1,000 worth of Fortrea’s shares at the IPO in June 2023 would now be looking at an investment worth $210.13.
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