Latest news with #AndrewWitty
Business Insider
3 days ago
- Business
- Business Insider
CVS Snatches CalPERS Pharmacy Contract from UnitedHealth
CVS Health (CVS) has secured a major healthcare deal, winning a multi-year pharmacy benefits contract with CalPERS, outbidding rival UnitedHealth (UNH). The deal marks a significant win for CVS's Caremark unit and could shift competitive dynamics in the pharmacy benefits management (PBM) market. Elevate Your Investing Strategy: Take advantage of TipRanks Premium at 50% off! Unlock powerful investing tools, advanced data, and expert analyst insights to help you invest with confidence. Make smarter investment decisions with TipRanks' Smart Investor Picks, delivered to your inbox every week. Notably, CalPERS (California Public Employees' Retirement System) is the largest public pension fund in the U.S., serving over 2 million public employees, retirees, and their families in California. More Details About the Deal CalPERS is moving from OptumRx, a UnitedHealth subsidiary, to CVS Caremark, citing CVS's more competitive pricing. The pension fund also noted that CVS stood out among other bidders for its strong commitment to managing pharmacy costs and upholding high clinical standards. CVS will take over this role starting January 1, 2026. Under the agreement, CVS is required to meet specific cost and quality goals; failing to do so could cost the company up to $250 million in performance-based penalties. Meanwhile, the five-year deal will give outpatient prescription drug coverage to around 587,000 CalPERS members, or about 40% of those receiving health benefits through the system. CVS vs. UnitedHealth CVS Health has made a strong comeback in 2025 after facing several tough years. Year-to-date, CVS stock has gained over 40%. Additionally, CVS Health reported strong first-quarter results for 2025 in May, with revenue rising 7% year over year and adjusted earnings per share jumping to $2.25, up from $1.31 the previous year. The company also raised its full-year adjusted EPS forecast to $6.00–$6.20, up from a prior range of $5.75–$6.00, and now expects to generate about $7 billion in cash flow. On the other hand, UnitedHealth has been struggling with multiple challenges. In April, the company reported unexpectedly high medical costs in its Medicare division. By May, it suspended its full-year financial forecast, and CEO Andrew Witty stepped down suddenly for personal reasons. So far this year, UnitedHealth shares have fallen more than 40%. Which Healthcare Stock Is a Strong Buy, According to Analysts? Using the TipRanks Stock Comparison tool, we compared these healthcare stocks. Among these companies, CVS stock has earned a Strong Buy rating from analysts, while UNH carries a Moderate Buy. In terms of share price appreciation, CVS' average stock price target of $81.27 offers an upside potential of 27% from current levels.
Yahoo
4 days ago
- Business
- Yahoo
Dear UnitedHealth Stock Fans, Mark Your Calendars for July 29
After a challenging year for healthcare stocks, all eyes are on UnitedHealth Group (UNH) as it prepares to unveil its second-quarter earnings on July 29. Once a stalwart of defensive investing, UnitedHealth has seen its stock tumble nearly 45% year-to-date, making it one of the worst performers in the S&P 500 Index ($SPX). Although its first-quarter revenues of $109.6 billion showed modest growth, rising medical care ratios and suspended full-year guidance have left investors on edge. Will UnitedHealth's upcoming results mark the beginning of a comeback or signal more turbulence ahead? Let's find out. Dear Nvidia Stock Fans, Mark Your Calendars for July 16 How to Buy Tesla for a 13% Discount, or Achieve a 26% Annual Return Retirement Ready: 3 Dividend Stocks to Set and Forget Get exclusive insights with the FREE Barchart Brief newsletter. Subscribe now for quick, incisive midday market analysis you won't find anywhere else. UnitedHealth Group (UNH), a global health benefits and services company, commands a market capitalization of $272.7 billion. The company remains a favorite among income-focused investors, offering an annual dividend rate of $8.84 per share and a yield of 3.03%. It has endured a sharp decline, down 42% year-to-date and 43% over the past 52 weeks. UnitedHealth trades at 10.88x trailing earnings and 13.92x forward earnings, both well below the sector medians of 17x and 17.49x, respectively. This discount reflects heightened uncertainty but also offers potential value for investors seeking quality at a lower multiple. On April 17, UnitedHealth reported first-quarter financials that highlighted both resilience and challenges. Revenue climbed $9.8 billion year-over-year to $109.6 billion, driven by the company's ability to serve more people across both its UnitedHealthcare and Optum businesses. Earnings from operations totaled $9.1 billion, while cash flows from operations reached $5.5 billion. The company returned nearly $5 billion to shareholders in the quarter through dividends and share repurchases, and its return on equity stood at a robust 26.8%, highlighting efficient use of capital. Operationally, the medical care ratio rose to 84.8% from 84.3% a year earlier, mainly due to ongoing Medicare funding reductions, changes in member mix, and increased senior care activity. These pressures were partially offset by changes to the Medicare Part D program, which also contributed to a reduction in days claims payable to 45.5 from 47.1 in the first quarter of 2024. Meanwhile, the operating cost ratio improved to 12.4% from 14.1%, reflecting gains in technological and operational efficiency. Reflecting on the quarter, then-CEO Andrew Witty noted, 'UnitedHealth Group grew to serve more people more comprehensively but did not perform up to our expectations, and we are aggressively addressing those challenges to position us well for the years ahead, and return to our long-term earnings growth rate target of 13 to 16%.' As UnitedHealth Group approaches its July 29 earnings release, analysts are keeping a close eye on the company's next moves, especially after a year that's been anything but predictable. The company's decision to suspend its 2025 outlook, citing higher-than-anticipated medical expenditures, has injected a dose of caution into the market. Still, management has made it clear that they expect to return to growth in 2026, setting the stage for a potential rebound. For the current quarter ending June 2025, the consensus earnings estimate stands at $5.08 per share, down sharply from $6.80 in the same period last year, a steep 25.3% year-over-year decline. The full-year 2025 forecast is similarly downbeat, with analysts projecting average earnings of $21.76 per share versus $27.66 in 2024, reflecting a 21% drop. In parallel, UnitedHealth is sharpening its operational focus by announcing plans to exit Latin America through the sale of its Banmedica operations for approximately $1 billion in 2025. This move is designed to cut costs and strengthen the company's financial position, allowing more resources to be directed toward core U.S. markets and strategic growth initiatives. Despite these headwinds, analyst sentiment remains surprisingly upbeat. The 24 analysts surveyed currently rate UnitedHealth as a consensus 'Moderate Buy,' signaling broad confidence in the company's long-term fundamentals and its ability to execute through the cycle. The average 12-month price target sits at $361.24, which represents 24% upside from the current share price. UnitedHealth's upcoming Q2 report is a real fork in the road for this battered stock. After a nearly 45% drop this year, the pressure is on, but with analysts still calling it a 'Buy' and price targets averaging around $361, there's a sense that the worst could be behind it if management delivers updates that point to a credible turnaround. On the date of publication, Ebube Jones did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. This article was originally published on Error while retrieving data Sign in to access your portfolio Error while retrieving data Error while retrieving data Error while retrieving data Error while retrieving data
Business Insider
4 days ago
- Business
- Business Insider
UnitedHealth Stock (UNH) Down as $3.3B Secret Sales Raise Eyebrows
UnitedHealth Group (UNH) is facing questions about how it maintained its streak of over 60 consecutive quarterly earnings beats. According to a Bloomberg report, the healthcare giant quietly sold stakes in some business units to firms like Warburg Pincus and KKR (KKR), generating $3.3 billion in profit that helped it beat Q424 estimates. Elevate Your Investing Strategy: Take advantage of TipRanks Premium at 50% off! Unlock powerful investing tools, advanced data, and expert analyst insights to help you invest with confidence. Make smarter investment decisions with TipRanks' Smart Investor Picks, delivered to your inbox every week. UNH stock was down over 2% during Tuesday's regular trading session as investors reacted to the company's accounting move and looked ahead to its Q225 earnings report on July 29. The Deals That Boosted Profits At the end of 2024, UnitedHealth was facing rising medical costs and regulatory pressures that were hurting profits. The company then offset this by making the last-minute asset sales to private equity firms. Without the asset sales, UNH would have missed earnings for the first time in over 15 years. Thus, UNH added the gains to its adjusted earnings, which helped it report adjusted EPS of $6.81 in Q4 and beat the forecast by $0.07. UNH's Unusual Accounting Practices It must be noted that UNH left out a $7.1 billion loss from its Brazil exit, calling it a one-time event, but included the $3.3 billion gain from U.S. asset sales in its core earnings. Analysts say that's allowed under U.S. rules, though some called it 'unusual' and said the earnings were low-quality and non-recurring. This new finding adds to the growing list of challenges UnitedHealth is already facing. The company is under criminal investigation by the DOJ for alleged Medicare billing irregularities. In May, CEO Andrew Witty abruptly resigned, replaced by former CEO Stephen Hemsley, to lead the company as it deals with growing regulatory pressure. Is UNH a Good Buy Right Now? Turning to Wall Street, UNH stock has a Moderate Buy consensus rating based on 18 Buys, seven Holds, and one Sell assigned in the last three months. At $357.14, the average UnitedHealth stock price target implies a 21.54% upside potential.
Yahoo
09-07-2025
- Business
- Yahoo
DOJ questions former UnitedHealth employees over Medicare billing practices, WSJ reports
(Reuters) -Investigators from the U.S. Department of Justice are questioning former employees of UnitedHealth Group as part of a probe into the company's Medicare payment practices, the Wall Street Journal reported on Wednesday, citing people familiar with the matter. Shares of the healthcare conglomerate were down 1.7% at $302.47 in early trading. The WSJ report said former employees were questioned by prosecutors working for the healthcare-fraud unit in recent weeks about the company's efforts to record specific diagnoses that generate higher payments and document lucrative diagnoses, including testing patients and sending nurses to patients' homes. UnitedHealth said in a statement it stands "firmly behind" the integrity of it Medicare Advantage business. It also said the WSJ article was "relying on incomplete data, a predetermined narrative and a flawed understanding of how the Medicare Advantage program works." "After more than a decade of a similar Department of Justice challenge to our Medicare Advantage business, the Special Master concluded there was no evidence to support the claims that we were overpaid or engaged in any wrongdoing." The FBI and the Department of Health and Human Services' Office of Inspector General also participated in some of the interviews, the report added. The DOJ did not immediately respond to a Reuters request for comment. Once considered a reliable bet, the healthcare behemoth has lost its appeal following a series of management missteps. UnitedHealth's stock has fallen nearly 40% so far this year. The Wall Street Journal reported in May that the healthcare-fraud unit was overseeing an investigation into the company's Medicare business, the U.S. government program that covers medical costs for individuals aged 65 or older and those with disabilities. The report came a day after UnitedHealth suspended its annual forecast due to surging medical costs and said that former CEO Stephen Hemsley would replace Andrew Witty.
Forbes
23-06-2025
- Business
- Forbes
UnitedHealth Stock: Should Investors Bet On A Rebound?
Investors should brace for short-term volatility, but UnitedHealth's long-term narrative ... More appears intact. UnitedHealth was once hailed as the market's top bet to become the first trillion-dollar healthcare company. The stock has delivered steady gains for decades, rewarding both retail and institutional investors. But recently, the fairy tale has fractured with UNH erasing nearly 50% of its market value within a few weeks. This article delves into: What Triggered The Steep Sell‑Off In UnitedHealth Stock? UnitedHealth shares have fallen nearly 40% year-to-date, due to a perfect storm of: This string of setbacks comes on the heels of a turbulent 2024 marked by a massive cyberattack, surging medical costs and intense public backlash following the high-profile murder of UnitedHealthcare CEO Brian Thompson. In April, UnitedHealth reported its first earnings miss since the 2008 financial meltdown, and cut its full-year earnings guidance, rattling investor confidence. This triggered a 22% single-day stock drop, its steepest since 1998. Then, on May 13, UnitedHealth CEO Andrew Witty abruptly stepped down for 'personal reasons' and former CEO Stephen Hemsley returned to lead the company. With Witty stepping down, UNH also withdrew guidance for 2025, sending shares down 18%. Within a couple of days, the Wall Street Journal reported that the U.S. Department of Justice is conducting a criminal investigation into UnitedHealth Group for possible Medicare fraud. However, UnitedHealth denied the report and stated that it has not received any notification from the DOJ regarding the reported investigation and reaffirmed "the integrity of its Medicare Advantage program." Nevertheless, the stock slipped further. Adding to its woes, a whistleblower-backed investigation published by The Guardian later in May, alleged that UnitedHealth paid nursing homes large bonuses to reduce hospital transfers for ailing residents, a strategy that allegedly prioritized cost savings over patient care. UnitedHealth has denied the claims and filed a defamation lawsuit against The Guardian, but the report has intensified public and media scrutiny. These compounding challenges have dampened investor sentiment and even sparked questions about UnitedHealth's continued inclusion in the prestigious Dow Jones Industrial Average. But, exactly how sick is this healthcare conglomerate? Understanding UnitedHealth's Business Model UnitedHealth Group (UNH) is more than just a traditional insurer. It operates as a vertically integrated healthcare ecosystem, combining insurance with healthcare delivery and services. Its two primary segments complement each other: UnitedHealthcare – the traditional insurance business, providing coverage across employer-sponsored plans, Medicare Advantage, Medicaid and individual markets. This segment generates revenue from premiums, and its profitability is tied to effective control of medical care ratios (MCR) also known as medical loss ratios (MLRs). The more healthcare patients use, the less money insurance companies typically make. Optum – The tech-enabled healthcare services division includes: Optum diversifies UnitedHealth's revenue beyond insurance and supports margin expansion through its more profitable services. This dual-core structure allows UnitedHealth to capture value across the healthcare value chain – from providing insurance to delivering care to managing drug benefits and data analytics. Medicare has been a thriving business for UNH with its dominance in Medicare Advantage – a Medicare-approved plan offered by a private company as an alternative to original Medicare for an individual's health coverage. It works like this: UnitedHealthcare gets reimbursed to cover Medicare patients, while channeling a share of the premiums to pay UNH's Optum doctors to treat the patients, thereby profiting from both the doctor and insurance sides. An estimated 10% of doctors in America are employed by or under contract with UNH. Thanks to this vertically integrated business model, UNH's margins are typically higher than pure-play insurers that face tighter federal caps on profits. Medicare insurers receive higher payments for sicker patients with certain diagnosed conditions, and a Wall Street Journal report noted that UnitedHealth consistently identified such conditions among its Medicare beneficiaries, resulting in increased reimbursements. Premiums still represent the lion's share of UNH's revenue—over 75% for the past three years. Optum on the other hand has higher operating margins vs. UnitedHealthcare. Within Optum, OptumInsight is the high-margin standout, with operating margins of 16.5% in 2024, 22.5% in 2023 and 24.6% in 2022. Although UNH has historically maintained a strong competitive moat, the chinks in the armor were clearly visible when UNH cut its 2025 earnings guidance in April. The company cited indications for increased care activity in its Medicare Advantage business and lower-than-expected Medicare reimbursements in OptumHealth due to lower patient engagement. This was a double whammy, as UnitedHealthcare earns more when members use less healthcare, while Optum benefits when patients use more. It must be noted that Optum's Medicare business is multi-payer and not limited to just UnitedHealthcare members. Still, the company described these headwinds as 'highly addressable' and expressed confidence in its ability to course correct. Later, when CEO Andrew Witty stepped down, UnitedHealth withdrew its 2025 guidance entirely, as Medicare Advantage cost trends worsened. Examining The Financial Health Of UnitedHealth Despite recent headwinds, UnitedHealth remains profitable, cash-rich and creditworthy. In 2024, cash flows from operations reached $24.2 billion, about 1.6 times net income. For the first quarter of 2025 alone, operating cash flow was $5.46 billion. Its cash and cash equivalents totaled $30.7 billion as of March 31, 2025, up from $25.3 billion at the end of 2024. UNH's available-for-sale debt securities portfolio had a weighted-average duration of 4.2 years and carried a weighted-average credit rating of 'AA' as of March 31, 2025 – an investment grade rating which means the debt carries a relatively low risk of default. Top-line growth has been steady: Revenues climbed from $324.2 billion in 2022 to $400.3 billion in 2024. Earnings from operations rose from $28.4 billion to $32.3 billion over the same period with operating margins holding above 8%. However, rising medical costs, up from $210.8 billion in 2022 to $264.2 billion in 2024, remain a concern. UnitedHealth's medical care ratio (MCR) – the share of premiums spent on medical claims – also increased, from 82% in 2022 to 85.5% in 2024, and was 84.8% for the first quarter of 2025. Is UNH Stock's Sell-Off Temporary? Is UnitedHealth stock's recent sell-off temporary and can investors expect a rebound? In this section, we'll examine in detail whether the issues that caused the sell-off are transitory or structural. Newly reinstated CEO Stephen Hemsley said in his prepared remarks at the annual shareholder meeting held in June that UNH will establish a 'prudent 2025 earnings outlook' along with initial 2026 commentary when it reports second quarter earnings on July 29. So, any concerns about withdrawn guidance should be quelled by July end. Former CEO Andrew Witty called UNH's first-quarter performance 'unusual and unacceptable,' citing the following main reasons: Can UNH Fix These Issues? During the June shareholder meeting, Hemsley offered an apology for UnitedHealth's recent performance. He stated, 'Clearly, we have gotten things wrong. We underestimated care activity and cost trends and generated outsized growth.' He added that UNH was significantly re-tooling its efforts to ensure more accurate forecasting of both care and financial activity and has incorporated its elevated care activity experience into the Medicare Advantage bids for next year's Medicare business. As for Optum, it is reinvigorating the theme of value-based care, which aligns and incentivizes physicians and care teams to get ahead of disease rather than chasing symptoms. Hemsley said UNH will provide better clarity and understanding on the financial drivers of OptumHealth, particularly as it moves through the final phases of the risk model transition. CEO Shakeup: Awkward Timing, But Transition To Proven Leadership The sudden departure of Andrew Witty raised red flags, but the transition of leadership to Stephen Hemsley may ultimately restore investor confidence. Witty, who became the CEO of UNH in 2021, was a British executive and came from a pharma backdrop. Prior to joining UNH, he was the CEO of the drug maker GlaxoSmithKline (GSK). Some of his key hires also lacked insurance experience. Witty worked from the U.K, and flew to the U.S. in corporate jets for attending company meetings. His non-insurance background may have left him at a disadvantage. Some online discussions blame Witty for missing the writing on the wall and failing to accurately forecast the business he was heading, implying that his exit, though sudden, may have been necessary. Looking ahead, UNH's direction over the next few years will be shaped by Stephen Hemsley, a solid and seasoned leader who played a pivotal role in the company's giant-sized growth. His appointment seems decisive with no mention of an interim role or a pending leadership search. According to a SEC filing, Hemsley will receive a $1 million annual base salary and a one-time $60 million stock option grant, with a 3-year cliff vesting provision and no additional annual equity awards or cash incentives during the first three years of his employment. A man of few words, Hemsley has historically let his performance speak for itself which, under the current circumstances, may be exactly what the company needs. Key Risks To Consider Before Buying UNH While UNH appears confident in addressing its near-term issues, the most consequential headwind for UNH appears structural. UNH's true and bigger challenges to navigate, include the Medicare reimbursement reform, and regulatory/legal risks. A significant risk that could affect UnitedHealth more than other insurers is an ongoing change in how Medicare compensates Medicare Advantage plans. UNH is the largest provider of Medicare Advantage plans, which offer additional benefits not included in traditional Medicare – such as vision, hearing and dental coverage, along with caps on out-of-pocket spending. Medicare pays insurers a fixed amount per insured patient, based on the patient's disease and health conditions reported by the insurer. This reporting process is dubbed risk coding. Reports suggest that UNH is particularly effective in this area, identifying and reporting more diseases and health conditions vs. competitors, resulting in substantially higher Medicare reimbursements to the tune of billions of dollars. However, these practices have also drawn scrutiny, including from the Department of Justice, according to reports. Due to rising costs across the system, Medicare is implementing changes to reduce the financial impact of coding. The new model, known as V28 eliminates or reduces many high-value payments tied to specific diagnoses. UnitedHealth has been struggling to adapt to the new Medicare payment system, which replaced a framework that had previously worked in its favor. V28 is being phased in over three years from 2023. With the second year completed, the majority of those reductions are already in effect. Some analysts believe that this transition is largely responsible for the sharper-than-expected financial impact on UNH. Its prior efficiency at maximizing reimbursements may be why it is absorbing a bigger share of the blow. The highlight in UNH's June shareholder call was Hemsley's 'fresh perspective on some of the most publicly discussed matters.' UnitedHealth will bring in independent experts for a comprehensive review of some of the company's reportedly controversial practices, including in Medicare billing. One of the most significant risks UnitedHealth may face is any regulatory effort to dismantle or restrict its vertically integrated structure. The company's competitive edge stems from the integration of insurance, pharmacy services, data analytics and care delivery under a single umbrella. If regulators move to unwind this model, it could diminish operational efficiency and cost advantages eroding UNH's competitive differentiation. Bottom Line The issues that triggered UNH's sell-off appear temporary and largely manageable. However, deeper, structural challenges tied to Medicare reimbursement changes and regulatory scrutiny could weigh on the stock longer than expected. Stephen Hemsley's return adds much-needed credibility and continuity, but rebuilding investor trust will take time. Investors should brace for short-term volatility, but UnitedHealth's long-term narrative appears intact given its integrated business model, resilient revenue growth, and strong cash flows. The stock is badly bruised but I think it's far from broken.
