Wolfe Research maintains UnitedHealth at Outperform, $390 target

On Wednesday, Wolfe Research reaffirmed its positive stance on UnitedHealth Group (NYSE:UNH) stock, maintaining an Outperform rating and a $390.00 price target. The healthcare giant, currently trading at a P/E ratio of 12.75 and commanding a market capitalization of $278 billion, faces scrutiny over its future earnings potential after withdrawing its 2025 guidance. According to InvestingPro data, the company maintains strong fundamentals with an 8% revenue growth over the last twelve months. Wolfe Research’s estimates, aligned with the broader market consensus, suggest earnings per share (EPS) for UnitedHealth could reach $21-$22 by 2025. While 20 analysts have recently revised their earnings estimates downward according to InvestingPro, which offers comprehensive analysis through its Pro Research Reports covering 1,400+ top stocks, the firm acknowledges the uncertainty surrounding these figures, citing "opaque" company commentary and market anxiety ahead of the second quarter 2025 earnings report.

The analysis by Wolfe Research indicates that the EPS for UnitedHealth in 2025 will be a critical factor for the stock’s performance, but equally important will be the market’s belief in the achievability of these earnings. The focus is particularly on OptumHealth’s performance. Wolfe Research’s current estimates are based on a 1% margin in the Medicare Advantage (Med Adv) segment and a near breakeven at OptumHealth’s Physician Capitation Business. These estimates already factor in conservative biases, such as a -2% margin on non-capitated Medicare Advantage lives.

The company’s first-quarter 2025 guidance update for OptumHealth and subsequent comments suggest that the cost pressures felt at UnitedHealthcare (UHC) are not fully impacting OptumCare’s Medicare Advantage business. This is attributed to OptumCare physicians’ greater control over patient care, which potentially shields them from the full cost trends seen with non-capitated UHC members. Wolfe Research believes that investors may favor a more cautious assumption that would align cost trends at OptumCare with those at UHC, which could signal a stabilization of numbers. The firm notes that such an assumption would result in a $1.18 incremental headwind, bringing the EPS closer to $20 for 2025.

The report from Wolfe Research emphasizes the importance of setting a realistic and achievable guide for investors to establish confidence in the stock. As UnitedHealth Group approaches its second quarter 2025 report, scheduled for July 16, the market’s perception of the company’s financial outlook remains a key factor in determining the stock’s valuation floor. InvestingPro analysis suggests the stock is currently undervalued, with additional insights available through their comprehensive Fair Value model and financial health scoring system, which rates UNH’s overall financial health as "GOOD" with a score of 3.0 out of 5.

In other recent news, UnitedHealth Group’s earnings and revenue forecasts have been a focal point for analysts. Bernstein SocGen Group has maintained an Outperform rating on UnitedHealth with a price target of $377, emphasizing Optum Health’s significant contribution to the company’s revenue, which exceeds $100 billion. HSBC, however, downgraded UnitedHealth’s stock from Hold to Reduce, citing concerns about the medical loss ratio and potential policy risks affecting Optum Rx. They have set a new price target of $270, reflecting a cautious outlook on UnitedHealth’s financial recovery. Wolfe Research also adjusted their price target to $390 while maintaining an Outperform rating, highlighting potential margin improvements in the Medicare Advantage segment.

Amid these developments, Bernstein has revised its earnings per share estimates downward by 13% for 2026, following the departure of CEO Andrew Witty. This change, along with the suspension of 2025 guidance, has influenced their price target reduction. Additionally, UBS’s healthcare symposium revealed ongoing challenges in the healthcare insurance market, such as rising employee healthcare costs and economic uncertainty, which could impact UnitedHealth’s operations indirectly. These recent developments underscore the varied perspectives on UnitedHealth’s future performance among different analyst firms.

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