United Therapeutics (UTHR): $7.27 Beat Consensus. Operating Income Fell 9%.

United Therapeutics Corporation (UTHR) Q2 2026 — Revenue $783.3M, DOWN 1.9% YoY (it beat a $765.9M bar). Operating income fell 9.2% to $330.8M, margin 45.6% to 42.2%. Net income still rose 7.6% and diluted EPS rose 13.4% to $7.27 - because tax expense fell from $98.9M to $39.7M and the share count fell 5.4%. Stock +1.0% to $524.05. United Therapeutics reported GAAP diluted EPS of $7.27 against a consensus near $6.85 and the wires called it a 6% beat. Look one line up: revenue FELL 1.9%, operating income fell 9.2%, pre-tax income fell 8.7%. All the earnings growth came from a tax rate that went 24% to 11% and a 5.4% smaller share count. THE CALL: HOLD (3/5, GREAT BALANCE SHEET, ALREADY PAID FOR) — base-case value ~$543.0 vs ~$524.05 today. KEY METRICS: - CALL: HOLD 3/5, fair value ~$543 vs $524.05 (+3.6%), 15% BELOW the Street's $635.20. We rebuild 2026 on a repeatable tax rate: revenue $3,133M (H1 run-rated) at H1's 42.0% margin = $1,316M EBIT, plus $114M other income = $1,430M pre-tax. At 19% tax not 11% that is $1,158M, or $25.17/share - not the $27.91 TTM shows. Franchise 11x EBIT $14.5B + $3.8B net cash + $5.0B risk-adjusted pipeline, over 42,890,692 shares = $543. Bear $365, bull $734. - WHERE THE BEAT CAME FROM - THE TAX LINE. Pre-tax income FELL $35.7M, $408.4M to $372.7M. Net income ROSE $23.5M, $309.5M to $333.0M. Only tax sits between: it fell $59.2M, $98.9M to $39.7M, 11% vs 24% - a saving 2.5x the rise in net income. Tax that same $372.7M at last year's 24% and diluted EPS is ~$6.19, BELOW the $6.41 earned a year ago and below the $6.83 consensus. Like-for-like, this was a MISS. - BASIS: $7.27 IS DILUTED, $6.86 IS A COINCIDENCE. $7.27 is GAAP DILUTED on 45.8M shares; BASIC was $7.82 on 42.6M. Last year: $6.41 diluted, $6.86 BASIC. So '$7.27 vs $6.86' sets this year's diluted against a figure identical to last year's basic. Correct YoY: $7.27 vs $6.41 (+13.4%); correct consensus ~$6.83-6.86 diluted. That +13.4% = net income +7.6% x a 5.4% smaller share count - buyback ~40% of it, tax the rest. - THREE ARITHMETIC CHECKS. One: $783.3M less cost of sales $99.5M, R&D $146.3M, SG&A $206.7M = $330.8M EBIT vs $364.5M (-9.2%). Two: net income $333.0M plus tax $39.7M = $372.7M pre-tax, LOWER than last year's $408.4M. Three: 42,890,692 cover-page shares x $524.05 = $22.5B, matching the tape. Tyvaso DPI $326.6M (+4%), nebulized Tyvaso $126.0M (-18%), Remodulin $126.3M (-6%), Unituxin $65.2M (+12%). - WHAT $524.05 REQUIRES. Equity $22.5B but enterprise only $18.7B - $3,803.4M of cash comes off and there is NO debt. At 9% with 2% growth it must throw off ~$1.31B a year forever; taxed at 19%, 2026 EBIT is ~$1.07B, and after ~$418M/yr of xeno-organ capex it throws off ~$0.74B. The price needs ~$560M/yr that does not exist yet: ralinepag (PAH) and nebulized Tyvaso (IPF), both filed, 2027 calls. Margin: 50.9% (2023) to 42.2%. What to watch: Changes our mind UP: total Tyvaso back to growth in a quarter, or an approval on either filing. Confirms the bear: nebulized Tyvaso down another 15% in September, or operating margin below 40%. We would buy $420-$450. Also on YouTube: @ChargedAlpha DISCLAIMER: For informational and educational purposes only. Not financial advice. Do your own research before any investment decision.