Zinger Key Points
- UnitedHealth Q4 adjusted EPS rose to $6.81, beating consensus by $0.09, while revenue missed estimates at $100.8 billion.
- KeyBanc forecasts EPS growth to 13-16% by 2026, citing Medicare Advantage member retention as a key driver.
On Thursday, UnitedHealth Group UNH reported the fourth-quarter 2024 earnings and reaffirmed 2025 guidance.
The company reported adjusted EPS of $6.81, up from $6.16 a year ago, beating the consensus of $6.72. Revenues increased 6.8% year over year to $100.8 billion, missing the consensus of $101.76 billion.
KeyBanc Capital Markets says the third-quarter results included some unusual fluctuations but did not change the overall outlook.
One-time revenue factors drove the higher medical loss ratio (MLR), while core cost trends stayed consistent, impacted by hospital coding and specialty drug expenses.
Also Read: UnitedHealth CEO Highlights Hospitals, Doctors, Pharma’s Role In Soaring Health Care Costs
The MLR is the percentage of insurance premium dollars spent on reimbursement for clinical services and activities to improve health care quality.
KeyBanc maintains the Overweight rating with a price forecast of $650.
Analyst Matthew Gillmor says key positives include favorable Medicare Advantage (MA) Annual Enrollment Period (AEP) performance, highlighting near-record retention rates and a strong mix of members, including dual-eligibles and returning customers.
Gillmor says this positive trend could boost margins since Medicare Advantage (MA) members in their second year or beyond are typically more profitable. In 2024, UnitedHealth faced challenges from higher member churn due to competitors offering enhanced supplemental benefits.
The analyst writes the trends support the view of an EPS growth acceleration for UnitedHealth, potentially aided by a better MA rate environment under the upcoming Trump administration.
KeyBanc remains confident EPS growth can return to the 13-16% range by 2026, supporting a valuation recovery to historical multiples around 19x earnings versus 17x currently.
Meanwhile, Cantor Fitzgerald shared a cautiously optimistic view on UnitedHealth Group's 2025 outlook following discussions with management, describing the company's guidance as conservatively positioned.
Analyst Sarah James highlighted the firm’s confidence, stating, “We continue to view UNH as our Top Pick for 2025, and the current 15.3x multiple as undervaluing the company’s strong business positioning and diversified portfolio.”
Price Action: UNH stock is up 1.12% at $516.30 at last check Friday.
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