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On Tuesday, Bernstein analysts led by Lance Wilkes increased their price target on UnitedHealth Group (NYSE:UNH) shares to $703 from the previous target of $697, while reiterating an Outperform rating on the healthcare giant. The adjustment comes ahead of UnitedHealth’s first-quarter earnings report, which is scheduled for this Thursday. According to InvestingPro data, UNH currently trades near its 52-week high of $630.73, with analyst targets ranging from $518 to $700. The company maintains an impressive "GREAT" Financial Health score of 3.13 out of 5.
In his statement, Wilkes highlighted the positive year-to-date performance of UnitedHealth, noting a 16% rise in its stock value, outperforming the S&P 500’s 8% decline over the same period. Despite this growth, the analyst believes there is still room for valuation upside, with expectations of accelerated earnings per share (EPS) growth ranging from 26-28%.
Wilkes does not anticipate EPS and medical loss ratio (MLR) outperformance in the first quarter, citing conservative reserving and expected utilization rates that align with a higher flu season. However, he predicts that the recovery in Medicaid margins will commence in the second half of the year and projects improvement in Medicare Advantage (MA) margins by 2026.
The bullish stance on UnitedHealth is driven by anticipated significant margin recovery in its Medicare Advantage, Medicaid, and Value-Based Care (VBC) businesses over the coming years. Additionally, the analyst expects normalization of utilization trends and a reduction in policy uncertainty. The revised price target reflects an increase in near-term EPS projections to $34.32, up from $34.02, while maintaining a next twelve months (NTM) price-to-earnings (P/E) ratio of 20.5 times. The higher EPS forecast is primarily attributed to Medicare Advantage rates and seasonal adjustments due to Part D redesign. With a current P/E ratio of 37.36 and strong financial metrics including $20.7 billion in levered free cash flow, UNH demonstrates robust operational performance. For a comprehensive analysis of UNH’s valuation and future prospects, access the detailed Pro Research Report available exclusively on InvestingPro.
In other recent news, UnitedHealth Group’s financial outlook has been a focal point for analysts and investors alike. Raymond (NSE:RYMD) James reiterated a Strong Buy rating with a $635 price target, expressing optimism about UnitedHealth’s potential to exceed first-quarter 2025 earnings estimates. The firm noted that the Medical (TASE:BLWV) Loss Ratio (MLR) estimates might need adjustment due to Part D seasonality, which could impact earnings positively. Meanwhile, KeyBanc Capital Markets maintained an Overweight rating and a $650 price target, highlighting the favorable Medicare Advantage rates for 2026, which are expected to improve margins for UnitedHealth.
Cantor Fitzgerald also kept an Overweight rating with a $700 target, projecting upward revisions to UnitedHealth’s financial outlook later in 2025. The Centers for Medicare and Medicaid Services announced a 5.06% increase in Medicare insurer payment rates for 2026, a development that could generate over $25 billion in additional revenue for the industry. This adjustment is seen as a response to rising medical costs and may enhance UnitedHealth’s position in the Medicare Advantage market.
In regulatory news, the FTC lawsuit against UnitedHealth’s Optum unit concerning insulin pricing practices is set to resume. This follows a temporary halt due to the recusal of FTC members with prior involvement in PBM-related cases. The lawsuit alleges unfair practices by pharmacy benefit managers, including Optum, in limiting access to lower-priced insulin drugs. These developments underscore the ongoing scrutiny and dynamic changes within the healthcare insurance sector.
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