UnitedHealth Group (UNH) has faced its share of difficulties in recent months, marked by a tragic event that shook its leadership and intensified scrutiny of the healthcare giant. In December 2024, its CEO, Brian Thompson, was fatally shot in New York City. The shocking incident raised investor concerns about UnitedHealth’s business practices, including handling claims and broader critiques of the U.S. healthcare system. Nevertheless, the company reported confidence-inspiring Q4 performance metrics.
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In the meantime, UNH stock is trading at an attractive valuation, considering strong growth expectations from Wall Street in the coming years. Year-to-date, the stock is up almost 4%. With sentiment slowly recovering and UNH overcoming its recent challenges, I maintain my bullish view of the stock.
Why Has UNH Stock Struggled Recently?
One of the most significant factors weighing on UNH stock lately has been the tragic loss of Brian Thompson last December. It’s had a notable impact, especially on the company’s management strength, at least in the short to medium term. However, the bigger issue is that his passing brought much attention to significant criticisms of the U.S. healthcare system. There has, since, been a renewed focus on allegations of excessive claim denials, which has led to greater public distrust and added momentum to the stock’s sell-off.
This issue has compounded on top of the general headwinds the insurance industry has faced over the past year. Factors like increased medical costs, state-driven Medicaid redeterminations, and Medicare Advantage reimbursement cuts weighed heavily on margins. UnitedHealth’s medical care ratio rose to 85.5%, translating to higher costs from hospital coding intensity and specialty medication prescribing. When you combine these elements with other external factors like last year’s cyberattack, you can see why investors haven’t rushed to accumulate shares of the healthcare insurance giant.
Key Catalysts Drive UNH Results
Despite a turbulent year, UnitedHealth’s most recent Q4 and full-year report was excellent, reminding Wall Street just how resilient the cash flows of a healthcare insurer can be. Revenues grew 8% year-over-year to $100.8 billion for the quarter, supported by robust results across its UnitedHealthcare and Optum business units.
In its latest submission to regulators, UNH confirmed the expansion of its customer base, with an additional 2.4 million domestic enrollees in 2024. This was thanks to refreshed plans stressing transparency and affordability. Meanwhile, Optum delivered exceptional growth, with revenues up 12% to $253 billion for the year. Optum Health’s value-based care initiatives also paid off, serving 4.7 million patients by year-end, with expectations to add 650,000 more in 2025.
Bottom-line-wise, operational efficiencies certainly played a helpful role. UnitedHealth’s operating expense ratio improved from 14.7% in 2023 to 13.2% in 2024. This came as AI-driven initiatives, mainly in customer service, helped streamline operations and improve consumer experiences while paving the way for cost cuts in 2025. Thus, UnitedHealth achieved adjusted EPS of $27.66 for the full year, marking another period of double-digit EPS growth and setting a new record.
Superb 2025 Outlook for UnitedHealth
With all roadblocks removed, UnitedHealth has set the stage for a strong 2025, more so when supplemented by a recovery in the broader healthcare industry. The company projects revenues of $450-$455 billion and adjusted net earnings of $29.50-$30.00 per share. The midpoint of this outlook implies year-over-year growth of 8%.
However, these expectations must be supported by several key factors. First, Medicaid enrollment should rebound after the closing of eligibility redeterminations, while Medicare Advantage plans should keep attracting seniors looking for coordinated care. In fact, UNH has set the bar high, aiming to serve an extra 1.9 million individuals in 2025.
Second, Optum’s growth trajectory remains robust. Optum Health anticipates serving 5.4 million value-based care patients, marking a 14% increase from 2024. Optum Rx’s pharmacy benefits management unit is also expected to grow by leveraging expanded client relationships and “smart” drug pricing strategies.
Last but not least, there are several favorable macro trends that I believe are worth taking into account, including higher adoption of value-based care and improved reimbursement rates, positioning UNH for continued growth.
Why UNH Stock is Attractively Priced
As UNH stock traded sideways over the past year, the company grew its EPS into the double-digits, and with sentiment now recovering, I believe the healthcare insurer offers compelling value at current prices of around $525 per share.
Notably, the stock trades at around 17x projected FY2025 earnings, a reasonable multiple given its overall earnings growth strength. Wall Street analysts expect UNH to deliver 13% EPS growth in FY2026 and FY2027. Given that analysts were rather pessimistic about the stock in recent months, the turnaround in sentiment is evident. Quite possibly, UNH could outperform market expectations and add to its rebounded gains if, in hindsight, the pessimism was overblown.
Is UnitedHealth a Good Stock to Buy Right Now?
Wall Street analysts seem highly optimistic following UNH’s Q4 report. The healthcare insurance giant has gathered 18 unanimous Buy ratings over the past three months, forming a Strong Buy consensus on Wall Street. Moreover, UNH stock carries an average price target of $650.19, which implies almost 24% upside potential from current price levels of ~$525 per share.
If you can’t decide which analyst to favor when trading UNH stock, the most profitable analyst covering the stock (on a one-year timeframe) is David Windley of Jefferies (JEF). His average return of 10.15% per rating and a 61% success rate make him one of the leading analysts on the stock.
What Doesn’t Kill You Makes You Stronger
UnitedHealth has had its fair share of challenges lately, including leadership upheaval and heightened scrutiny. The company was battered by tragedy, worsening sentiment, and even existential risks to its business. And yet, its resilience has shone through.
UNH has climbed out of the sentiment doldrums to retain its position as a reliable U.S. healthcare insurer with a commercially viable future.
Solid performance metrics showcase a growing customer base and demonstrate robust growth in its Optum segment. Performative strength not only appeases the skeptics but also highlights UNH’s resilience in the face of turmoil. It also reminds investors that short-term gyrations based on knee-jerk reactions will likely return to mean eventually. With promising projections for 2025 and beyond, this long-term compounder is trading at attractive levels and setting the stage to continue its springy rebound.
