On Wednesday, KeyBanc made an adjustment to the stock price target for UnitedHealth Group (NYSE:UNH), reducing it from $675.00 to $650.00, while maintaining an Overweight rating on the stock. The revision follows UnitedHealth's third-quarter results, which were marked by higher medical costs and a 2025 earnings per share (EPS) outlook that fell short of expectations.
The KeyBanc analyst cited the disappointing third-quarter outcomes, particularly emphasizing the impact of increased medical expenses. The initial EPS forecast for 2025, which was presented by UnitedHealth, did not meet the anticipated figures, prompting the firm to adjust its price target.
Despite the lower-than-expected EPS guidance for 2025, KeyBanc continues to hold a favorable long-term view on UnitedHealth. The analyst believes that the company remains a solid long-term investment and considers it a defensive strategy for investing in the anticipated recovery of Medicare Advantage (MA) margins in 2025. The upcoming election is also seen as a significant event that could influence the company's performance.
KeyBanc's analysis acknowledged the ongoing challenges, mainly related to Medicare Advantage, which could delay the realization of UnitedHealth's EPS growth targets until 2026. Nevertheless, there is an expectation that UnitedHealth will close the gap between its current EPS growth projection for 2025, which is between 8-9%, and its long-term growth targets of 13-16%, with potential upside over the coming quarters.
The price target adjustment to $650 is based on KeyBanc's revised estimates, reflecting a more cautious stance in the short term while still recognizing UnitedHealth's potential for growth and recovery in the medium to long term.
In other recent news, UnitedHealth Group has seen a series of adjustments to its price target by financial firms such as RBC Capital, Stephens, Truist Securities, Jefferies, and Deutsche Bank. RBC Capital reduced its target to $595, while maintaining an Outperform rating, citing changes in the company's future earnings. Stephens cut its target to $605, maintaining an Overweight rating due to persistent challenges in the managed care organization sector.
Truist Securities reduced its target to $625, still recommending the stock as a Buy, despite a higher Medical Loss Ratio and a conservative view for future expectations. Jefferies lowered its target to $647, endorsing the stock with a Buy rating, and Deutsche Bank adjusted its target to $595, retaining a Buy rating on the stock.
UnitedHealth's third-quarter revenues reached $101 billion, marking a 9% increase. The company added over 2.4 million members to UnitedHealthcare and processed 1.6 billion prescriptions through Optum Rx. The company projects the upper end for 2025 earnings to be around $30 per share.
These are recent developments, demonstrating UnitedHealth's resilience amid a changing healthcare landscape. Despite challenges such as Medicare rate cuts and Medicaid member redeterminations, UnitedHealth remains optimistic about growth potential in Medicare Advantage and value-based care models.
InvestingPro Insights
UnitedHealth Group's recent financial data and market performance offer additional context to KeyBanc's analysis. According to InvestingPro, UNH's revenue growth stands at 9.42% for the last twelve months as of Q3 2024, with a robust revenue of $393.9 billion. This aligns with KeyBanc's view of UnitedHealth as a solid long-term investment, despite short-term challenges.
InvestingPro Tips highlight UNH's strong dividend history, having raised its dividend for 14 consecutive years and maintained payments for 32 years. This demonstrates the company's financial stability and commitment to shareholder returns, even in the face of current headwinds like increased medical costs.
The company's P/E ratio (adjusted) of 25.0 suggests it's trading at a premium, which could be justified by its market position and growth prospects. An InvestingPro Tip notes that UNH is a "prominent player in the Healthcare Providers & Services industry," supporting KeyBanc's optimistic long-term outlook.
For investors seeking a deeper understanding of UnitedHealth's potential, InvestingPro offers 11 additional tips, providing a comprehensive view of the company's financial health and market position.
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