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On Wednesday, Raymond (NSE:RYMD) James downgraded UnitedHealth Group (NYSE:UNH)’s stock from Strong Buy to Market Perform, in response to the company’s announcement earlier in the day that it is withdrawing its 2025 guidance. This decision comes shortly after UnitedHealth revised its guidance during the first quarter report and also revealed a change in leadership, with Andrew Witty stepping down as CEO and former CEO Stephen Hemsley taking over the role once again. According to InvestingPro data, UnitedHealth maintains a ’GOOD’ financial health score of 2.93, suggesting solid fundamentals despite recent challenges.
The unexpected withdrawal of the 2025 guidance, which occurred just one month after the previous revision, took investors by surprise and led to an 18% decline in UnitedHealth’s stock on the same day. The stock has now fallen 38% since the start of the year, with InvestingPro analysis showing the stock trading near its 52-week low of $309.10. Despite the recent turbulence, the company has maintained dividend payments for 33 consecutive years, with a current yield of 2.7%. Analysts at Raymond James expressed concern over the current visibility of the company’s future, noting the low predictability for the remainder of 2025, the necessity for the company to meet the "Stars test" in October, and the likelihood of subdued membership growth in 2026.
In light of these developments, Raymond James has revised its earnings per share (EPS) estimates for UnitedHealth. The firm has lowered its 2025 EPS estimate to $22.00, down from $26.25, and the 2026 EPS estimate to $25.00, down from $30.00. These adjustments reflect a change in the medical loss ratio (MLR) assumption to 88.5% for 2025 and 87.6% for 2026, representing an increase of 100 basis points and 80 basis points, respectively.
The analysts believe that the company’s valuation, which is implied at approximately 12.5 times the new 2026 EPS estimate, is reasonable when compared to peer valuations and considering the recent trend of negative revisions. However, they indicated that it may take some time for a clearer picture of UnitedHealth’s performance to emerge.
In other recent news, UnitedHealth Group has announced a leadership change, with Stephen Hemsley returning as CEO, succeeding Andrew Witty. This transition coincides with the suspension of the company’s 2025 financial guidance due to challenges in the Medicare Advantage segment and increased care activity. Despite these hurdles, several analysts maintain positive outlooks on UnitedHealth. Jefferies has adjusted its price target to $400, citing concerns over the Medicare Advantage business but maintains a "Buy" rating. Truist Securities also keeps a "Buy" rating with a $580 target, emphasizing UnitedHealth’s strong balance sheet and free cash flow as buffers against risks. Piper Sandler reiterates an "Overweight" rating, setting a price target of $552 and expressing confidence in Hemsley’s leadership to drive a turnaround. Bernstein supports an "Outperform" rating with a $594 target, viewing the CEO change as a strategic move to address current challenges. Morgan Stanley (NYSE:MS) maintains its "Overweight" rating with a $563 target, acknowledging the leadership shift and suspension of guidance as part of UnitedHealth’s strategy to focus on long-term growth prospects.
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