UnitedHealth Group is poised for continued earnings growth as its strategic changes begin to yield positive results, according to Bank of America. The firm upgraded its rating from neutral to buy and increased its price target from $420 to $450, suggesting a potential 19% upside from the stock's recent closing price. In premarket trading, shares of UnitedHealth rose by 3%.
Analyst Kevin Fischbeck noted that recent data indicates the strong performance in Q1 was not solely due to external factors like flu and storms, reinforcing a more optimistic outlook for the company.
Over the past year, UnitedHealth's shares have surged nearly 26% as the company has implemented a comprehensive strategy to enhance its profit margins, which includes reducing membership, divesting its U.K. Optum unit, and investing in artificial intelligence.
The company's earnings potential is now projected to be 50% higher than its previous 2026 outlook, which could lead to earnings per share exceeding $26, surpassing analysts' consensus estimates by 5% to 10%. Fischbeck highlighted the growth of Optum Health, particularly its acquisitions of physician groups and clinics, as a key driver for future earnings growth.
He anticipates that UnitedHealth will maintain an annual EPS growth rate of 13-16% over the next few years, especially as it shifts focus back to membership growth once it achieves its margin targets. This positive sentiment aligns with the broader consensus among analysts, with 23 out of 30 recommending a buy or strong buy for UnitedHealth's stock