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On Wednesday, RBC Capital Markets adjusted its outlook on UnitedHealth Group (NYSE:UNH), reducing the stock’s price target to $525 from the previous $655. Despite this change, the firm maintained its Outperform rating on the healthcare giant’s shares. The stock, currently trading at $438.07, has experienced a significant 27% decline over the past week, though InvestingPro analysis indicates the company remains undervalued relative to its Fair Value.
The revision followed a detailed review of UnitedHealth’s first-quarter earnings for 2025. RBC Capital’s analysts, led by Ben Hendrix, noted the company’s performance did not meet expectations due to a couple of significant factors. UnitedHealth’s management pointed to the lower engagement of new Optum Health members, which resulted in reimbursements falling short of projections. Additionally, the company experienced higher-than-anticipated Medicare Advantage (MA) utilization rates. Despite these challenges, the company maintains a strong market position with a $397.9 billion market capitalization and an "GREAT" overall financial health score according to InvestingPro analysis.
Hendrix’s commentary highlighted the firm’s belief that UnitedHealth could overcome these challenges in the future. "We believe early recognition of these issues should inform accurate 2026 pricing, giving us confidence that these headwinds are addressable in the intermediate term," he stated. This perspective underpins RBC Capital’s decision to sustain the Outperform rating, despite the lowered price target. The company’s strong fundamentals support this view, with a moderate debt level and sufficient cash flows to cover interest payments. Get deeper insights into UnitedHealth’s financial health and access 15 additional exclusive ProTips with an InvestingPro subscription.
The update on UnitedHealth’s stock outlook reflects the firm’s analysis of the company’s ability to address the current issues affecting its performance. RBC Capital’s stance suggests a belief in UnitedHealth’s potential to adjust its strategies and pricing to mitigate the impact of the engagement and reimbursement concerns that have surfaced in the recent quarter.
Investors and market watchers now have a revised benchmark from RBC Capital to gauge UnitedHealth’s performance as the company strives to adapt to the challenges identified in its first-quarter results and improve its positioning for the next year.
In other recent news, UnitedHealth Group reported first-quarter results that fell short of expectations, with adjusted earnings per share (EPS) at $7.20, slightly below consensus estimates, and revenue at $109.6 billion, 2% below expectations. The company reduced its full-year 2025 earnings guidance to $26.00-$26.50 per share, down from the previous range of $29.50-$30.00, citing revenue-related issues and higher cost trends. Analysts from Bernstein, TD Cowen, Jefferies, KeyBanc, and Oppenheimer have all lowered their price targets for UnitedHealth, reflecting a cautious outlook following these developments.
Bernstein adjusted its price target to $594 while maintaining an Outperform rating, citing a 5.3% drop in revenues from the Optum Health segment. TD Cowen reduced its target to $520, maintaining a Buy rating, and highlighted unexpected challenges in the Medicare Advantage unit. Jefferies set a new target of $530, also with a Buy recommendation, noting operational setbacks but expressing confidence in the company’s ability to address these issues.
KeyBanc lowered its price target to $575, retaining an Overweight rating, and noted revenue pressures related to Risk Adjustment Factor and utilization rates. Oppenheimer revised its target to $600, maintaining an Outperform rating, and pointed to issues with OptumHealth coding practices and the Medicare Advantage risk model as key factors in the guidance reduction. Despite these challenges, analysts have expressed varying degrees of confidence in UnitedHealth’s capacity to navigate the current hurdles and improve its performance in the coming years.
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