UnitedHealth's Q1 Medical Cost Update, Prudent Outlook Eases Investor Concerns: Goldman Sachs

Tuesday, UnitedHealth Group UNH reported better-than-expected revenue and earnings in the first quarter as it still deals with the cyberattack on its subsidiary Change Healthcare in February this year.

The company reported adjusted EPS of $6.91, up from $6.26 a year ago, beating the consensus of $6.62. UnitedHealth’s revenues increased nearly $8 billion to $99.8 billion, beating the consensus of $99.3 billion.

UnitedHealth maintained its adjusted EPS guidance of $27.50-$28.00 vs. Goldman Sachs consensus of $27.58, with the reaffirmed range absorbing $0.30-$0.40 of business disruption costs.

Related: UnitedHealth’s Change Healthcare Seeks Consolidation of Cyberattack Lawsuits in Nashville Court

Goldman Sachs analyst writes that overall, the positive medical cost update and a prudent outlook should help to ease investor concerns on utilization risk to UnitedHealth’s EPS in 2024.

UnitedHealth’s first quarter MCR was 84.3%, including 40bp of costs related to supporting providers during the Change cyberattack. Goldman writes that the impact from Change was slightly lower than investors expected. 

Goldman Sachs maintains the Buy rating with a price target of $593.

UnitedHealth took a cautious approach by setting aside $800 million for potential claims related to the Change cyberattack. 

Additionally, contrary to the estimated $250 million, they didn’t report any positive adjustments to reserves from previous years.

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Price Action: UNH shares are up 5.10% at $468.35 on the last check Tuesday.