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On Monday, Raymond (NSE:RYMD) James made a significant adjustment to the price target for UnitedHealth Group (NYSE:UNH) shares, reducing it from $635.00 to $540.00, while maintaining a "Strong Buy" rating on the stock. The adjustment comes after UnitedHealth Group’s first-quarter 2025 performance and updated guidance for the year. According to InvestingPro data, UNH is currently trading near its 52-week low, with a P/E ratio of 19.06. The company, with a market capitalization of $415 billion, appears undervalued based on InvestingPro’s Fair Value analysis.
The firm’s analyst cited a roughly 10% decrease in the estimated non-GAAP earnings per share (EPS) for 2026 to $30.00, which led to the reduced price target. This new target is set at 18 times the estimated EPS, reflecting a one-time discount compared to the S&P 500 index. UnitedHealth’s stock experienced a significant drop of approximately 22% on Thursday.
UnitedHealth Group reported an adjusted EPS of $7.20, which was below both the Street’s expectation of $7.30 and Raymond James’ own estimate of $7.37. The shortfall was primarily due to poorer performance in the Medicare Advantage risk segment within its Optum Health division. The company pointed to higher utilization levels and lower than anticipated risk scores from new members from non-UNH Medicare Advantage plans as contributing factors. Despite these challenges, InvestingPro analysis reveals the company maintains strong fundamentals with annual revenue of $410 billion and robust cash flows sufficient to cover interest payments. For deeper insights into UNH’s financial health and future prospects, investors can access the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers.
In addition to the quarterly earnings miss, UnitedHealth Group also revised its 2025 guidance downwards. The company now anticipates an adjusted EPS of $26.00-26.50, a decrease from the previously forecasted range of $29.50-30.00. The Street’s expectation had been $29.72. According to the analyst, the majority of this guidance reduction is attributable to a $3.3 billion adjusted operating income (AOI) reduction at Optum Health, with $1.25 billion due to UnitedHealthcare (UHC), mainly from issues with group Medicare Advantage. Seven analysts have recently revised their earnings estimates downward, as tracked by InvestingPro, which offers real-time access to over a dozen additional key insights about UNH’s financial health and market position.
The analyst also noted that the challenges faced by UnitedHealth Group are largely specific to the company and should not be extrapolated to other managed care organizations. This point was underscored by the fact that another player in the market, which Raymond James does not cover, reported better than expected first-quarter results on the same day.
In other recent news, UnitedHealth Group reported its first-quarter 2025 earnings, revealing a miss on both earnings per share (EPS) and revenue forecasts. The company posted an EPS of $7.20, which was below the expected $7.29, and reported revenue of $109.6 billion, falling short of the $111.5 billion forecast. This performance reflects ongoing challenges in the healthcare sector, particularly within the Medicare Advantage market. UnitedHealth has revised its EPS outlook for 2025 to a range of $26 to $26.50 while maintaining its consolidated revenue outlook of $450-$455 billion. Despite the earnings miss, OptumRx, a division of UnitedHealth, reported a 14% revenue growth, exceeding $35 billion for the quarter. The company is focusing on cost containment and innovation in healthcare delivery to address these challenges. Analysts have noted the significant changes in the Medicare Advantage market and the potential impact of pharmaceutical tariffs and reform discussions. UnitedHealth remains committed to long-term earnings growth, targeting a return to a 13-16% growth rate by 2026.
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