2Q Earnings Playbook: Eyes on Utilization

Research evidence excerpt

2Q Earnings Playbook: Eyes on Utilization

Idea

July 14, 2026 05:20 AM GMT

Morgan Stanley & Co. LLCMHealthcare Services | North America Erin Wright

Equity Analyst

2Q Earnings Playbook: Eyes on Erin.Wright1@morganstanley.comCraig Hettenbach +1 212 761-6137

Craig.Hettenbach@morganstanley.com +1 212 761-6435

Utilization Linda Bolduc

Linda.Bolduc@morganstanley.com +1 617 856-8009

What’s Changed Michelle Foley

Research Associate

BrightSpring Health Services (BTSG.O) From To Michelle.Foley@morganstanley.com +1 212 761-4056

Price Target $71.00 $80.00 Jialin Jin

MCO stocks have rallied into 2Q on euphoria over more ResearchJay.Jin@morganstanley.comAssociate +1 212 761-3913

manageable medical cost trends, and while this sets a higher bar, Kun Chen

Equity Strategist

we view MLR beats will be rewarded. Expectations are low for Kun.Chen1@morganstanley.com +1 212 761-5228

Hospitals & mixed in HCIT, the bar for Distributors/Labs Healthcare Services & Distribution

somewhat lower, and Animal/Dental sentiment remains bearish. North America

Industry View AttractiveM

What We Are Watching by Subsector:

Managed Care (UNH Top Pick): We expect 2Q MLR beats as utilization trends

continue to normalize, supported by favorable commentary from UNH, HUM, and

ELV, as well as softer hospital volume data. Key debates include the durability of

this trend, 2027 MA bids, ACA Marketplace morbidity/risk adjustment (CNC, MOH),

Medicaid uncertainty at ELV, and early reads on 2028 Stars.

Distributors (OW CAH, MCK, COR, MDLN): A compelling entry point after recent

underperformance. 2Q results should reinforce durable growth and resilient

fundamentals. The key catalyst is CAH’s FY27 guidance, where we see support for

~13% EPS growth. Positive MCO earnings could drive additional rotation, but we