Raymond James Beefs Up UnitedHealth Price Target On Smoother Sailing Of Change Deal

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  • Raymond James reiterates a Strong Buy rating on UnitedHealth Group Inc UNH while raising the price target to $635 from $620 as a U.S. judge gave a green signal for Change Healthcare Inc's CHNG acquisition.
  • The ruling ended a 21-month fight between UnitedHealth and regulators. 
  • The analyst John Ransom writes that the deal is expected to close within ten days of the judge's decision, but DOJ is "evaluating next steps," and there is a slight chance of an appeal and further delay. 
  • For modeling purposes, the analyst assumes the deal closes October 1.
  • Adding in the CHNG deal, Raymond James is increasing the 2022 EPS estimate by $0.11 to $21.96 and the 2023 EPS estimate by $0.67 to $25.62.
  • Also ReadPeloton Stays Active With UnitedHealth - Renews & Expands Partnership
  • Raymond James says the deal marks the second largest acquisition in UNH's history and adds to a record M&A year with ~$18.5 billion of acquisitions to date plus the $6 billion LHC Group Inc LHCG and $1.5 billion EMIS Group Plc deals pending approval. 
  • The analyst writes that CHNG adds a unique combination of payor-facing analytics assets to UNH's arsenal. It estimates that CHNG is $0.67, or 2.7% accretive, assuming they finance $3 billion of the purchase at a 4% interest rate.
  • Price Action: UNH shares are up 1.32% at $518.85 on the last check Thursday.
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