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Final Medicaid Rates Announcement Is Good For UnitedHealth - Analyst Upgrades Stock, Sees Strong Upside

Published 05/04/2023, 19:28
Updated 05/04/2023, 20:40
© Reuters.  Final Medicaid Rates Announcement Is Good For UnitedHealth - Analyst Upgrades Stock, Sees Strong Upside
UNH
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Benzinga -

  • Raymond James upgraded the rating on UnitedHealth Group Inc (NYSE: UNH) to Strong Buy from Outperform while raising the price target to $630 from $615 following the announcement of final payment rates for Medicare Advantage plans for 2024 by Centers for Medicare & Medicaid Services (CMS) last week.
  • The analyst John Ransom said 2023/2024 estimates are largely unchanged as he models 2023 adj. EPS of $24.80, and 2024 adj. EPS of $28.02.
  • The analyst also rolled out 2025 estimates with revenue of $404B and adj. EPS of $31.65 (13% growth off 2024).
  • UNH trades at 17.6x of 2024E adj. EPS and 15.6x of 2025 estimate. The analyst's base case price target of $630 applies a 19.9x multiple on 2025 adj. EPS estimate, a ~1x discount to its 3-year average of 21x.
  • The bull case price target of $700 applies a 22.1x multiple to the 2025 EPS estimate, 22.1x is a 1x premium to the 3-yr average multiple and within the 3-yr trading range.
  • The bear case price target of $425 applies a 15.0x multiple on a 2025 EPS estimate that is 10% lower than the current estimate, or $28.48. 15.0x is a ~2.5x discount to its current multiple and near the low end of its 3-yr trading range.
  • The analyst asserts that the final rate, which includes around 1% improvement to the baseline rate (as compared to advanced notice of about a 2% cut), phases out the ICD-10 coding changes over three years and thereby offers a cushion against initial impact and provides room for behavioral change.
  • Price Action: UNH shares are up 3.50% at $510.51 on the last check Wednesday.
Latest Ratings for UNH DateFirmActionFromTo
Jan 2022SVB LeerinkMaintainsOutperform
Jan 2022BMO CapitalMaintainsMarket Perform
Jan 2022Raymond JamesMaintainsStrong Buy
View More Analyst Ratings for UNH

View the Latest Analyst Ratings

© 2023 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.

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