UnitedHealth Group vs. Eli Lilly: Which Healthcare Giant Offers a Stronger Long-Term Buy Case in 2026?

The healthcare sector in 2026 remains a cornerstone of global economic resilience, with two titans-UnitedHealth Group (UNH) and Eli Lilly (LLY)-dominating distinct sub-industries. While both companies operate within the broader healthcare umbrella, their sector dynamics, growth drivers, and valuation metrics diverge sharply. This analysis evaluates their long-term investment potential by contrasting their strategic challenges, financial performance, and market positioning.

Sector Dynamics: Divergent Paths in Healthcare

UnitedHealth Group operates in the insurance and managed care segment, a sector grappling with regulatory scrutiny, pricing pressures, and operational complexity. In Q3 2025, the company reported $113.2 billion in consolidated revenues, a 12% year-over-year increase, driven by UnitedHealthcare's 16% growth to $87.1 billion in revenue. However, the company faces near-term headwinds. Optimizing its operations-exiting 40% of its PPO footprint and reducing value-based care (VBC) membership by 10% in 2026-signals a strategic pivot toward margin quality over volume expansion. Additionally, UnitedHealthcare plans to shed 1 million Medicare Advantage members in 2026 to stabilize profitability, a move that reflects the sector's ongoing struggle with rising medical cost trends and Medicare funding constraints.

In contrast, Eli Lilly thrives in the pharmaceutical sector, where innovation and blockbuster drug performance drive growth. The company's Q3 2025 revenue surged 54% year-over-year to $17.6 billion, fueled by its diabetes and obesity treatments, including Mounjaro and Zepbound, which saw revenue increases of 109% and 185%, respectively. Lilly's market share in the pharmaceutical sector reached 6.21% for the 12-month period ending Q2 2025, with quarterly shares hovering near 7%. The company's aggressive R&D pipeline-highlighted by FDA approval of Imlunestrant for breast cancer and Kisunla for Alzheimer's-positions it to dominate the pharma landscape by 2026, with analysts projecting it will surpass rivals like Merck in revenue.

Valuation Metrics: Contrasting Risk and Reward

Valuation metrics further underscore the divergent trajectories of these two healthcare giants. UnitedHealth Group trades at a price-to-earnings (P/E) ratio of 21 times full-year 2025 earnings estimates, a stark contrast to its intrinsic value, which is estimated to be 76.8% higher. This undervaluation reflects investor skepticism about its near-term margin recovery, particularly as the company navigates restructuring costs and regulatory investigations into its billing practices. However, management's focus on disciplined execution and cost control-such as repricing strategies and operational efficiency-suggests a path to sustainable growth by 2027. Analysts project 9% to 10% annualized earnings growth for UHG from 2026 to 2027, contingent on resolving current challenges.

Eli Lilly, by contrast, commands a premium valuation, trading at 45 times full-year 2025 earnings estimates, despite being considered overvalued by 69.2% relative to its intrinsic value according to value analysis. This premium is justified by its explosive revenue growth-nearly 35% in 2025-and its leadership in the obesity drug market, where tirzepatide and next-generation therapies are expected to drive multi-decade growth. The company's recent regulatory approvals and robust pipeline, including orforglipron for diabetes and obesity, further solidify its long-term upside. However, its high valuation leaves less room for error, particularly if demand for its blockbuster drugs plateaus or faces generic competition.

Strategic Considerations: Balancing Near-Term Risks and Long-Term Potential

For UnitedHealth Group, the critical question is whether its restructuring efforts will translate into margin recovery without sacrificing long-term growth. The company's exit from 1 million MA members in 2026, while painful in the short term, could stabilize its medical care ratio (MCR), which rose to 89.9% in Q3 2025 due to elevated medical costs. If successful, this strategy could restore investor confidence and unlock value in a stock that currently trades at a significant discount to its intrinsic value. However, the company's exposure to regulatory and operational risks-such as investigations into its billing practices-remains a wildcard.

Eli Lilly's strength lies in its ability to capitalize on secular trends in chronic disease management and aging populations. Its dominance in the obesity and diabetes markets, coupled with advancements in Alzheimer's research, positions it to outperform peers in 2026. Yet, its high valuation and reliance on a narrow product portfolio (Mounjaro and Zepbound account for a significant portion of revenue) introduce volatility. A slowdown in demand or regulatory setbacks could disproportionately impact its stock price.

Conclusion: A Tug-of-War Between Stability and Growth

The choice between UnitedHealth Group and Eli Lilly hinges on an investor's risk tolerance and time horizon. UnitedHealth Group offers a compelling value play for those willing to endure near-term turbulence in exchange for a potentially undervalued stock with a strong foundation in the essential healthcare insurance sector. Its strategic pivot toward margin quality and disciplined execution could yield substantial returns by 2027, particularly if it successfully navigates regulatory and operational challenges.

Eli Lilly, meanwhile, is a high-conviction growth story for investors seeking exposure to the pharmaceutical sector's innovation-driven momentum. Its blockbuster drugs and robust R&D pipeline justify a premium valuation, but the risks of overpaying for future growth are significant.

For a long-term buy case in 2026, UnitedHealth Group may present a more balanced opportunity, offering a lower entry point and a diversified business model in a sector critical to global healthcare infrastructure. However, those who prioritize high-growth innovation and are comfortable with elevated valuations may find Eli Lilly's trajectory more compelling.