On Wednesday, Wells Fargo updated its outlook on UnitedHealth Group (NYSE:UNH), increasing the stock's price target to $630 from the previous $525. The firm sustained an Overweight rating on the shares, indicating continued confidence in the company's performance.
The second quarter of 2024 was described as having mixed results for UnitedHealth Group. However, the pressures on the medical loss ratio (MLR) were attributed to factors that are expected to be temporary. The analyst from Wells Fargo noted that despite these pressures, the potential for significant positive developments in 2025 cannot be overlooked.
The new price target is based on a forward price-to-earnings (P/E) multiple of 19.0, an increase from the previous multiple of 17.0. This is calculated using the next twelve months plus one estimated earnings per share (EPS) of $33.08. The chosen P/E multiple aligns with the company's average historical ranges over the past 3, 5, and 10 years.
The analyst highlighted the possibility for positive earnings revisions, given that the current consensus for 2025 anticipates a year-over-year EPS growth of 12%, which is slightly below UnitedHealth's long-term compound annual growth rate (CAGR) of 13-16%. This forecast is conservative considering the expected margin tailwinds across UnitedHealth's various businesses, including Medicare Advantage and Optum Insight.
At the time of the report, Wells Fargo chose not to alter its adjusted annual EPS estimates for UnitedHealth Group. The decision reflects a balance between the immediate mixed results and the optimism for the company's performance in the near future.
In other recent news, UnitedHealth Group has been the focus of several analysts. Baird maintained an Outperform rating and raised the company's price target to $640, citing confidence in the healthcare giant's performance and valuation. Similarly, RBC Capital also maintained an Outperform rating, increasing the price target to $615 after UnitedHealth's recent earnings release showed a solid performance, particularly in its Medicare business.
Jefferies upgraded UnitedHealth Group's stock from a Hold to a Buy rating, significantly increasing the price target from $481 to $647. This revision is based on expectations of strong Medicare Advantage growth with better margins by 2025.
Truist Securities also raised the price target to $640 from $600, maintaining a Buy rating following UnitedHealth's robust second-quarter performance and reaffirmed full-year 2024 guidance.
These are recent developments, and they reflect analysts' confidence in UnitedHealth Group's ability to navigate market conditions and maintain its growth trajectory. However, the company has also faced challenges, including a Federal Trade Commission scrutiny over its pharmacy-benefit management pricing strategies and a cyberattack compromising the private data of an estimated one-third of Americans.
InvestingPro Insights
UnitedHealth Group's (NYSE:UNH) recent performance and future projections have caught the attention of investors and analysts alike. With a robust market capitalization of $505.17 billion and a P/E ratio standing at 34.05, UNH reflects a significant presence in the market. The adjusted P/E ratio for the last twelve months as of Q2 2024 is 24.87, which may suggest that the company is trading at a high earnings multiple, as noted in one of the InvestingPro Tips. This aligns with Wells Fargo's updated price target based on a forward P/E multiple.
InvestingPro Tips highlight UnitedHealth Group's consistent history of dividend growth, with the company raising its dividend for 14 consecutive years and maintaining dividend payments for 32 years. This is coupled with a dividend yield of 1.53% as of mid-2024, showcasing the company's commitment to returning value to shareholders. Additionally, the firm's stock has experienced a strong return over the last week, with a 9.57% price total return, and an impressive 15.15% over the past year, trading near its 52-week high at 98.95% of the peak price.
For investors looking to delve deeper into the financial health and future prospects of UnitedHealth Group, InvestingPro offers a wealth of additional tips. Currently, there are 17 more InvestingPro Tips available to help guide your investment decisions. To access these insights and make the most informed trades, use the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription. Visit https://www.investing.com/pro/UNH for a comprehensive analysis tailored to your needs.
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