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Deutsche Bank raises UnitedHealth stock target on earnings beat

EditorAhmed Abdulazez Abdulkadir
Published 19/04/2024, 10:56

On Friday, Deutsche Bank adjusted its outlook on UnitedHealth Group (NYSE:UNH), increasing the price target to $562 from $545, while maintaining a Buy rating on the stock. The adjustment followed UnitedHealth's first-quarter earnings report, which surpassed expectations despite several challenges, including a cyber attack on Change Healthcare (NASDAQ:CHNG).

UnitedHealth reported a quarterly earnings beat, although the quality of earnings and guidance were left open to investors' interpretation due to the cyber incident's impact. The analysis suggested that the full effect of the hack, along with conservative estimates around cost trends and utilization, would likely reduce UnitedHealth's earnings by approximately 2% for the entire year.

Investors had been keenly awaiting UnitedHealth's medical loss ratio (MLR) as a marker of cost trends and an indicator for other managed care organizations' (MCOs) performance. UnitedHealth posted a composite MLR of 84.3%, roughly 100 basis points above the guidance provided before the quarter.

This figure included a significant reserve increase due to anticipated, but not yet incurred, Change Healthcare claims, as well as costs stemming from relaxed prior authorizations in response to the cyber attack.

Despite these challenges, UnitedHealth has decided to maintain its core guidance for the year, which ranges from $27.50 to $28.00 in earnings per share (EPS). The company is accounting for additional expenses related to the Change Healthcare cyber attack, estimating an EPS impact between 85 cents and $1.00, while absorbing costs of 30 to 40 cents per share due to the incident.

In conclusion, while the first-quarter MLR was slightly higher than anticipated, the overall outlook for the year aligns with previous expectations, offering reassurance to investors about medical cost trends and their potential impact on earnings.

InvestingPro Insights

Following the recent earnings report and Deutsche Bank's updated price target for UnitedHealth Group (NYSE:UNH), investors may benefit from additional insights. UnitedHealth's management has demonstrated confidence in the company's financial health through aggressive share buybacks and a consistent track record of dividend increases, having raised its dividend for 14 consecutive years. This commitment is further underscored by the company maintaining dividend payments for 32 consecutive years, reinforcing its stability and reliability as an investment.

InvestingPro real-time data indicates that UnitedHealth Group has a robust market capitalization of $454.68 billion, with a P/E ratio of 20.61, reflecting the company's strong earnings. The revenue growth over the last twelve months as of Q1 2024 stands at 12.96%, showcasing solid top-line expansion. Additionally, the company has seen a significant return over the last week, with a 1-week price total return of 12.29%, which is particularly notable given the broader market conditions.

For those looking to delve deeper into UnitedHealth's performance and prospects, InvestingPro offers additional InvestingPro Tips. Currently, there are 13 more tips available that can provide valuable insights into the company's financial health, industry position, and future profitability. To access these tips and enhance your investment strategy, utilize the coupon code PRONEWS24 for an additional 10% off a yearly or biyearly Pro and Pro+ subscription at Investing.com/pro/UNH.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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