Managed Care & Hospitals Checkup: 3Q Earnings Preview: Expectations, Top Picks, Near-Term Catalysts with Long-Term Fundamentals in Focus

We remain constructive on managed care into 3Q earnings, as most intra-quarter commentary supports near-term momentum, with much of the focus on recently released MA plan designs and margin improvement narratives into FY27+. There is an opportunity for MCOs to provide more concrete FY27 commentary on 3Q calls, a catalyst that could build greater investor confidence in the baseline for underwriting longer-term growth (particularly through increased clarity around key swing factors for 2027/2028, including AEP, Stars, and Medicaid). While we believe investors expect another beat-and-raise quarter from MCOs, we also note that valuations have contracted since 2Q earnings and seem less demanding, suggesting a more reasonable bar against fundamentals that we see as slightly improved (or at least in line). For the hospitals, while headline volume growth appears favorable and primary expense trends remain stable, we believe that underlying mix details will define 3Q performance and narratives