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On Thursday, RBC Capital Markets adjusted its outlook on UnitedHealth Group (NYSE:UNH) by significantly reducing the stock’s price target. Analyst Ben Hendrix at RBC Capital announced the new price target of $355, a decrease from the previous $525, while maintaining an Outperform rating on the healthcare company’s shares. The stock, which has declined over 47% in the past six months and currently trades at a P/E ratio of 11.3x, appears undervalued according to InvestingPro Fair Value calculations.
The adjustment comes in response to a series of negative developments that have impacted UnitedHealth Group this week. Hendrix explained that the new price target is based on revised earnings per share (EPS) estimates and a contraction in the valuation multiple. The recalibration reflects both an uptick in cost trends and renewed concerns stemming from increased activity by the Department of Justice (DOJ). Despite these challenges, InvestingPro data shows the company maintains strong fundamentals with an overall Financial Health score rated as "GOOD" and robust cash flows sufficient to cover interest payments.
RBC Capital’s revised valuation is set at 13 times the firm’s 2026 earnings estimate for UnitedHealth Group. This adjustment takes into account the current volatility in headlines which is expected to continue in the short term. Despite these challenges, RBC Capital reaffirms its Outperform rating, signaling confidence in the stock’s long-term prospects. The company has demonstrated consistent shareholder returns, having maintained dividend payments for 33 consecutive years with a current yield of 2.73%.
Hendrix’s commentary highlighted that while the market has reacted to the negative news, the current price levels may not fully account for the company’s fundamental strengths. The analyst believes that the shares are currently oversold based on these fundamentals.
Looking ahead, RBC Capital anticipates a recovery in UnitedHealth’s performance. The firm forecasts a path to approximately 3% margin in the Medicare Advantage (MA) segment for the next year. This expectation supports RBC Capital’s decision to maintain its positive long-term thesis on UnitedHealth Group, despite the near-term headwinds and market turbulence.
In other recent news, UnitedHealth Group is under investigation by the Department of Justice for potential criminal Medicare fraud, focusing on its Medicare Advantage billing practices. The investigation has been ongoing since at least last summer, with limited details available about the specific allegations. Despite this scrutiny, Wolfe Research has maintained an Outperform rating and a $501 price target for UnitedHealth, citing the company’s risk scores and industry positioning. Conversely, JPMorgan has lowered its price target for UnitedHealth to $405, reflecting recent leadership changes and the suspension of its 2025 guidance. JPMorgan projects a 10% year-over-year adjusted earnings per share (EPS) growth for 2026, although this remains below UnitedHealth’s long-term growth targets.
Cantor Fitzgerald has reiterated an Overweight rating with a $440 price target, highlighting UnitedHealth’s diverse portfolio and potential in the expanding government insurance market. KeyBanc also adjusted its price target to $450, maintaining an Overweight rating despite challenges such as increased physician and outpatient costs. Analysts from these firms have expressed both optimism and caution, noting potential risks and opportunities in UnitedHealth’s business strategy and market environment. The ongoing developments around UnitedHealth’s Medicare practices and financial projections remain crucial for investors to monitor.
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