Latest news with #OptumHealth
Yahoo
30-05-2025
- Business
- Yahoo
UnitedHealth Group Incorporated (UNH): A Bull Case Theory
We came across a bullish thesis on UnitedHealth Group Incorporated (UNH) on FluentInQuality's Substack. In this article, we will summarize the bulls' thesis on UNH. UnitedHealth Group Incorporated (UNH)'s share was trading at $295 as of 27th May. UNH's trailing and forward P/E were 12.35 and 12.92 respectively according to Yahoo Finance. alexkich/ UnitedHealth Group is well-positioned as Medicare Advantage grows, with its Optum Health division reaching nearly 100 million consumers annually, reflecting massive scale but showing recent stagnation likely due to market saturation, post-pandemic shifts, and a focus on value-based care. Leadership changes saw the return of former CEO Stephen Hemsley, whose long tenure and deep involvement have driven significant company growth, now reinforced by a substantial equity stake that aligns his interests with shareholders. Employee sentiment, based on thousands of Indeed reviews, is generally positive, highlighting competitive pay, mission alignment, career growth opportunities, and work-life balance, though communication from management could improve. UnitedHealth's financial performance shows strong value creation, with return metrics at the high end for healthcare insurers despite the capital-intensive nature of the industry. Insider and institutional ownership indicate confidence, with major executives and directors holding meaningful stock positions and many institutions increasing their shares. The company's competitive advantages stem from its unmatched scale, extensive provider network, and vertical integration via Optum, which spans insurance, care delivery, pharmacy benefits, and data analytics, creating high switching costs and operational efficiencies. Although its brand faces some reputational challenges, UnitedHealth leverages its vast network and embedded contracts to maintain pricing power and market dominance. The healthcare industry itself is on a robust growth trajectory, with U.S. spending projected to rise from $4.5 trillion in 2024 to $6.8 trillion by 2032, driven by aging demographics, chronic disease, and increased managed care adoption, providing strong secular tailwinds for UnitedHealth's continued expansion and innovation. Previously, we have covered UnitedHealth Group Incorporated (UNH) in April 2025, wherein we summarized a bullish thesis by Oguz Erkan on Substack. The author highlighted its position as a resilient healthcare compounder, benefiting from the defensive nature of health insurance and strong pricing power even during economic downturns. Despite recent challenges and skepticism, UNH's vertically integrated model through Optum supported consistent revenue growth of 11% annually, with a fair valuation reflected in its forward P/E of 20, making it an attractive long-term investment, especially on price dips below $550. UnitedHealth Group Incorporated (UNH) is on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 139 hedge fund portfolios held UNH at the end of the first quarter which was 150 in the previous quarter. While we acknowledge the risk and potential of UNH as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than UNH but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock. READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock. Disclosure: None. This article was originally published at Insider Monkey. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
21-05-2025
- Business
- Yahoo
Wolfe Research Keeps Outperform Rating on UnitedHealth (UNH), Cuts PT
On May 20, Wolfe Research lowered the price target on UnitedHealth Group Incorporated (NYSE:UNH) from $501 to $390, keeping an Outperform rating on the stock. Analyst Justin Lake cut the price target after the company announced guidance suspension. During the Q1 FY2025 earnings call, the company had revised its full-year earnings outlook to between $24.65 and $25.15, whereas its adjusted earnings forecast was around $26 to $26.50. After missing both earnings and revenue estimates in Q1 2025, impacted by poor performance in Medicare, the company has suspended guidance for the year. The Medicare Advantage segment suffered due to the utilization trends doubling compared to expectations. Lake, however, remains optimistic about UNH's Medicare Advantage segment and expects it to recover margins in its $190 billion segment. The Chairman of UNH and newly appointed CEO, Stephen Hemsley, brings some optimism to the company. Hemsley created UnitedHealth's Optum Health, and Lake sees signs of stabilization and improvement at Optum Health moving forward. Hemlsey's target is to return to 13-16% growth in the long term. UnitedHealth Group Incorporated (NYSE:UNH) expects to return to growth in 2026. While we acknowledge the potential of UNH to grow, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and have limited downside risk. If you are looking for an AI stock that is more promising than UNH and that has 100x upside potential, check out our report about this cheapest AI stock. Read Next: and . Disclosure. None. Sign in to access your portfolio
Reuters
16-05-2025
- Business
- Reuters
UnitedHealth investors wary and looking for Medicare strategic change
NEW YORK, May 16 (Reuters) - UnitedHealth Group (UNH.N), opens new tab investors, stunned by missteps at the once predictable healthcare giant, are warily expecting strategic changes in its Medicare Advantage health insurance business over the next year. On Wednesday, the Wall Street Journal reported that UnitedHealth was the subject of a criminal probe at the Justice Department, just one day after the company withdrew its financial outlook and said Group CEO Andrew Witty was leaving. The blows are eroding the allure the healthcare behemoth once held for investors. UnitedHealth shares fell 14% in afternoon trading on Thursday to $274.35, near a five-year low. Shares had already plunged 18% on Tuesday, even as the company tried to assuage Wall Street concerns in a conference call. They are down 46% this year. "Given that the investor call earlier this week was so brief and had a lack of detail, investors are on the lookout for another shoe to drop," said James Harlow, senior vice president at Novare Capital Management. The firm owns shares of UnitedHealth. The DOJ criminal probe concerns the company's billing practices in its Medicare Advantage unit for older adults and people with disabilities, the Journal reported. UnitedHealth has said in regulatory filings that investigations, audits and reviews by a dozen different government agencies are underway. UnitedHealth said in a Wednesday statement that it had not been notified of a criminal probe. "We stand by the integrity of our Medicare Advantage program," the company added. Investors said they expect the company to turn around its profit outlook in 2026, at the earliest. Exiting less profitable markets where it sells Medicare Advantage plans for people aged 65 and older and making health insurance plan design changes to offer access to lower-cost healthcare providers and a focus on cheaper generic drugs, rather than pricey branded ones, could be under consideration at UnitedHealth, said Jeff Jonas, a portfolio manager at Gabelli Funds. Even after fixing plan issues, investors will likely need to price in a legal settlement that could cost the company over $1 billion, said Jonas. And traditional cost-management measures that insurers have historically deployed, such as the use of prior authorizations and claim denials, have come under public and legislative criticism since the killing of UnitedHealthcare executive Brian Thompson last December, Jonas added. In a first-quarter earnings call, the company noted that specialty care visits had generated higher costs after patients saw providers who are part of its Optum health services unit. "Optum and OptumHealth are UnitedHealth's supposed antidote to the low-margin business," said Kevin Gade, chief operating officer at Bahl & Gaynor. "The fact that OptumHealth is at the epicenter only magnifies this stock move." Optum is too tightly integrated with the company's Medicare Advantage plans for investors to expect a breakup of the insurance business and other healthcare operations, Jonas said. Harlow at Novare Capital Management said that without strategic details on a turnaround for its insurance business, a breakup would not assuage low morale from investors. For investors planning to ride out the challenges, last year's difficulties in CVS Health's Aetna insurance business come to mind. The company in 2024 missed earnings expectations for the first three quarters after facing rising healthcare costs and difficulty restructuring. "There's no doubt UnitedHealth got behind the pricing curve relative to peers for 2025," said Gade, who added the company still has value due to its average $20 billion in free cash after covering expenses. "I don't think it's as existential as the stock price may appear."
Yahoo
16-05-2025
- Business
- Yahoo
UnitedHealth investors wary and looking for Medicare strategic change
By Amina Niasse NEW YORK (Reuters) -UnitedHealth Group investors, stunned by missteps at the once predictable healthcare giant, are warily expecting strategic changes in its Medicare Advantage health insurance business over the next year. On Wednesday, the Wall Street Journal reported that UnitedHealth was the subject of a criminal probe at the Justice Department, just one day after the company withdrew its financial outlook and said Group CEO Andrew Witty was leaving. The blows are eroding the allure the healthcare behemoth once held for investors. UnitedHealth shares fell 14% in afternoon trading on Thursday to $274.35, near a five-year low. Shares had already plunged 18% on Tuesday, even as the company tried to assuage Wall Street concerns in a conference call. They are down 46% this year. "Given that the investor call earlier this week was so brief and had a lack of detail, investors are on the lookout for another shoe to drop," said James Harlow, senior vice president at Novare Capital Management. The firm owns shares of UnitedHealth. The DOJ criminal probe concerns the company's billing practices in its Medicare Advantage unit for older adults and people with disabilities, the Journal reported. UnitedHealth has said in regulatory filings that investigations, audits and reviews by a dozen different government agencies are underway. UnitedHealth said in a Wednesday statement that it had not been notified of a criminal probe. "We stand by the integrity of our Medicare Advantage program," the company added. Investors said they expect the company to turn around its profit outlook in 2026, at the earliest. Exiting less profitable markets where it sells Medicare Advantage plans for people aged 65 and older and making health insurance plan design changes to offer access to lower-cost healthcare providers and a focus on cheaper generic drugs, rather than pricey branded ones, could be under consideration at UnitedHealth, said Jeff Jonas, a portfolio manager at Gabelli Funds. Even after fixing plan issues, investors will likely need to price in a legal settlement that could cost the company over $1 billion, said Jonas. And traditional cost-management measures that insurers have historically deployed, such as the use of prior authorizations and claim denials, have come under public and legislative criticism since the killing of UnitedHealthcare executive Brian Thompson last December, Jonas added. In a first-quarter earnings call, the company noted that specialty care visits had generated higher costs after patients saw providers who are part of its Optum health services unit. "Optum and OptumHealth are UnitedHealth's supposed antidote to the low-margin business," said Kevin Gade, chief operating officer at Bahl & Gaynor. "The fact that OptumHealth is at the epicenter only magnifies this stock move." Optum is too tightly integrated with the company's Medicare Advantage plans for investors to expect a breakup of the insurance business and other healthcare operations, Jonas said. Harlow at Novare Capital Management said that without strategic details on a turnaround for its insurance business, a breakup would not assuage low morale from investors. For investors planning to ride out the challenges, last year's difficulties in CVS Health's Aetna insurance business come to mind. The company in 2024 missed earnings expectations for the first three quarters after facing rising healthcare costs and difficulty restructuring. "There's no doubt UnitedHealth got behind the pricing curve relative to peers for 2025," said Gade, who added the company still has value due to its average $20 billion in free cash after covering expenses. "I don't think it's as existential as the stock price may appear."
Forbes
15-05-2025
- Business
- Forbes
UNH Stock Vs. CVS Stock
CHONGQING, CHINA - APRIL 26: In this photo illustration, the logo of CVS Health Corporation is ... More displayed on a smartphone screen, with the company's red heart branding visible in the background, on April 26, 2025, in Chongqing, China. (Photo illustration by) Health insurance companies have been in the limelight lately after UnitedHealthcare suspended its guidance for the full year citing higher medical costs. This comes during a challenging time when the CEO Andrew Witty also stepped down for 'personal reasons.' To top things off, The Wall Street Journal reported that UnitedHealth is now under criminal investigation for possible Medicare fraud. See more – Is UNH Stock Now A Falling Knife? UnitedHealthcare stock is down 21% in a week while CVS stock is down 10%. Between the two of them, we believe CVS stock is currently a better pick. CVS stock trades at 9.4x trailing adjusted earnings, compared to 10.2x for UNH stock. UnitedHealth's better revenue growth and profitability explains the difference between the two. However, we think this gap in valuation will narrow in favor of CVS over the coming years. In the sections below, we discuss why we think CVS is a better pick than UNH by comparing a slew of factors, such as historical revenue growth, returns, and valuation. But, if you want upside with a smoother ride than an individual stock, consider the High-Quality portfolio, which has outperformed the S&P, and clocked >91% returns since inception. CVS has seen its revenue rise at an average annual rate of 8.5% from $292 billion in 2021 to $373 billion in 2024. On the other hand, UnitedHealth's average revenue growth rate of 12% from $285 billion to $400 billion over this period has been comparatively better. CVS Health's revenue growth fueled by positive performance in both its Medicare and Commercial plans. A key driver of this growth was an increase in total medical membership, which rose from 24.4 million in 2021 to 27.1 million currently. This upward trend in membership is anticipated to persist in the coming years, largely due to the aging U.S. population. Furthermore, CVS Health's pharmacy and consumer wellness business has demonstrated strong performance recently, propelled by higher prescription volumes and a favorable pharmacy drug mix. In contrast, UnitedHealth Group's revenue growth in recent years has been primarily driven by the escalating demand for its OptumHealth business, which delivers healthcare through local medical groups. To illustrate this, OptumHealth's revenue surged by 95% between 2021 and 2024, significantly outpacing the 39% revenue increase for the company as a whole. This substantial growth in OptumHealth can be attributed to a greater number of patients served under the company's value-based care models, including the expansion of at-home services. While OptumHealth has been the primary growth engine, UnitedHealth Group's other segments, such as its pharmacy benefit management (PBM) division, OptumRx, have also performed well. Additionally, the overall increase in Medicare membership has provided a tailwind for its insurance business. Buy or sell CVS stock? Between 2021 and 2024, CVS experienced a decline in operating margin, falling from 5.2% to 2.6%. In contrast, UnitedHealth Group (UNH) saw its operating margin improve from 7.6% to 8.1% during the same period. Examining the most recent twelve-month performance further highlights this difference, with UNH reporting an operating margin of 8.2% compared to CVS's 2.9%. Recently, both companies have faced pressure on their margins due to increasing medical costs. CVS's medical benefits ratio, which indicates the proportion of premiums spent on medical claims, rose significantly to 92.5% in 2024 from 85% in 2021. Similarly, UNH's medical benefits ratio increased from 82.6% to 85.5% over the same timeframe. Given the aging U.S. population and the general rise in healthcare expenses, it is anticipated that the medical benefits ratio for both companies will remain elevated in the near term. This increasing pressure on profitability has been a significant factor contributing to the recent underperformance of health insurance stocks. Regarding financial risk, UnitedHealth Group appears to be in a stronger position than CVS Health. UNH's debt-to-equity ratio of 18% is significantly lower than CVS's 107%, indicating a considerably lower level of debt relative to its equity. Additionally, UNH's cash-to-assets ratio of 11% is higher than CVS' 5%, suggesting a greater cash reserve relative to its total assets. Consequently, these metrics imply that UNH has a more favorable debt profile and a larger cash cushion compared to CVS. UNH stock has seen a 15% fall, moving from levels of $330 in early January 2021 to around $280 now, while CVS stock has seen little change, staying around levels of $60. This compares with an increase of about 55% for the S&P 500 over this roughly 4-year period – indicating that CVS and UNH underperformed the S&P in 2023 and 2024. In fact, consistently beating the S&P 500 — in good times and bad — has been difficult over recent years for individual stocks; for heavyweights in the Health Care sector including MRK, PFE, and JNJ, and even for the megacap stars GOOG, TSLA, and MSFT. In contrast, the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks has a history of comfortably outperforming the S&P 500 over the previous four-year span. Why is that? As a collective, HQ Portfolio stocks have delivered superior returns with reduced risk compared to the benchmark index; less of a roller-coaster experience, as shown in HQ Portfolio performance metrics. We see that UNH has demonstrated better revenue growth, is more profitable, and has a better financial position. However, looking at valuation, we think CVS is the better choice of the two. At its current levels of around $60, CVS stock is trading at 9.4x trailing adjusted earnings of $6.36 per share, aligning with the stock's average P/E ratio over the last four years. In comparison, at it current levels near $260, UNH stock is trading at 9.3x trailing adjusted earnings of $27.96 per share, versus the stock's average P/E ratio of 22x over the last three years. Taking into account the rise in overall medical costs, a fall in valuation multiple for both stocks seem justified. However, despite its attractive valuation UNH seems to have a high risk exposure, especially with the criminal investigation for Medicare fraud. We believe that the valuation gap between the two companies should narrow in favor of CVS, as the profitability of CVS improves. CVS is also undergoing restructuring aimed at improving efficiency and reducing costs.
