On Tuesday, TD Cowen reaffirmed its positive stance on UnitedHealth Group (NYSE:UNH) with a Buy rating and a price target of $520.00. The endorsement comes after UnitedHealth provided updates on its performance and management changes. Analyst Ryan Langston noted that the company’s Medicare Advantage (MA) trends are accelerating and could potentially extend to other areas, although MA is currently not achieving the 3-5% target margin. The company’s higher-than-average coding scores compared to the industry, as shown in a chart through 2023, suggest a significant impact from the version 28 (v28) coding changes, especially since competitor Humana (HUM) indicated a 160 basis point impact from v28 in 2025. According to InvestingPro data, Humana currently trades at $234.11, with analysts setting a consensus high target of $402.23, suggesting significant potential upside despite recent challenges.Want deeper insights? InvestingPro offers comprehensive analysis with 8 additional ProTips and detailed valuation metrics for Humana.
UnitedHealth announced CEO Andrew Witty’s departure for personal reasons, with former CEO and current Board Chair Stephen Hemsley stepping in as his replacement. Witty will remain as a senior adviser to Hemsley. Alongside this leadership transition, UnitedHealth withdrew its 2025 guidance due to the accelerating trend in MA and the higher medical costs observed in new MA members to UnitedHealth. Despite the withdrawal of guidance, the company expects to return to growth in 2026. For context, Humana maintains strong fundamentals with an "GOOD" Financial Health score according to InvestingPro, and a solid current ratio of 1.91, indicating robust operational stability in the sector.
During a call following the press release, CEO Stephen Hemsley and CFO John Rex discussed the reasons behind the withdrawal of guidance. They categorized the issues into three main areas: the impact of the health status of new members on UnitedHealth, the further acceleration of MA utilization, and the possible expansion of these trends to other benefit types. They stated that while UnitedHealth’s MA margins were not within the target range for 2025, they anticipate a return to the target in 2026. The executives also mentioned that upcoming bids for 2026 will account for the higher costs experienced, with adjustments to pricing and offerings to achieve long-term margin goals. This may lead to significant benefit reductions in 2026. Humana’s revenue growth remains robust at 10.09% over the last twelve months, with the company maintaining a healthy gross profit margin of 15.12%.
In other recent news, Humana Inc (NYSE:HUM). reported its first-quarter 2025 earnings, which exceeded analysts’ expectations with an earnings per share (EPS) of $11.58, surpassing the forecast of $10.07. Revenue slightly missed projections, coming in at $32.11 billion compared to the anticipated $32.22 billion. Despite this minor shortfall, the market reacted positively to Humana’s robust performance, reflected in a stock upgrade by Raymond James from Market Perform to Outperform, with a new price target of $315.00. This upgrade was attributed to Humana’s better-than-expected medical loss ratio and strong performance from its CenterWell pharmacy. Meanwhile, SelectQuote is facing legal challenges as a False Claims Act complaint was filed by the United States against the company, among others, alleging illegal kickbacks related to Medicare Advantage plan enrollments. This legal action has raised concerns about potential financial repercussions for SelectQuote if found liable, including significant penalties. The unfolding situation is being closely monitored by investors and the market.
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