TLDR
- UnitedHealth (UNH) stock has dropped nearly 40% year-to-date, ranking among the worst S&P 500 performers after disappointing earnings and withdrawn guidance
- The company missed Q1 revenue expectations at $109.6 billion versus $111.13 billion forecast, with adjusted EPS of $7.20 falling short of $7.27 estimate
- UNH stock rallied after its UnitedHealthcare division secured a multi-year deal with Memorial Sloan Kettering Cancer Center before a June 30 deadline
- Analysts maintain a “Moderate Buy” rating with an average price target of $363.43, representing 16% upside potential
- The company continues facing cost pressures in Medicare Advantage while holding $34.3 billion in cash and short-term investments
UnitedHealth Group has endured a punishing 2025, with shares plunging nearly 40% year-to-date. The healthcare giant now sits among the worst performers in the S&P 500 Index.
The company’s troubles began with a disappointing first-quarter earnings report that missed both revenue and earnings expectations. Revenue came in at $109.6 billion, falling short of the $111.13 billion Wall Street forecast.
Adjusted earnings per share reached $7.20, below the expected $7.27. The miss sparked concerns about mounting operational costs and inefficiencies within the organization.
Management withdrew forward guidance following the earnings disappointment. The company also announced a CEO shake-up that further unsettled investors.
The U.S. Department of Justice reportedly launched a probe into UnitedHealth’s billing practices. This investigation added another layer of uncertainty for shareholders.
Recent Rally Sparked by Healthcare Deal
UNH stock rallied after its UnitedHealthcare insurance division secured a crucial agreement. The company signed a multi-year deal with Memorial Sloan Kettering Cancer Center just before a June 30 deadline.
The agreement ensures MSK remains an in-network provider for UnitedHealthcare’s health plans. Without this deal, many cancer services would have become out-of-network for thousands of New York area patients.
UnitedHealthcare’s New York CEO Junior Harewood acknowledged the stress families faced during negotiations. He expressed relief at renewing the partnership with the renowned cancer center.
The dispute centered on payment increases, with UnitedHealthcare claiming MSK sought nearly 30% higher rates. MSK countered that UnitedHealthcare needed to prioritize patient access over cost concerns.
Financial Position Remains Strong Despite Challenges
UnitedHealth maintains a solid financial foundation with $34.3 billion in cash and short-term investments. This represents an increase from $29.1 billion at the end of 2024.
The company continues paying dividends, offering an annualized forward dividend of $8.51 for a 2.75% yield. UnitedHealth has raised its dividend for 15 consecutive years.
Current valuation metrics suggest potential value for contrarian investors. The stock trades at 13.7 times forward adjusted earnings and 0.69 times sales.
Both metrics sit well below their five-year historical averages. The stock has fallen 50% from its 52-week high of $630.73.
Earnings from operations rose to $9.1 billion in Q1, climbing 15% from the previous year. Adjusted net earnings improved 3% to $6.6 billion despite the overall challenges.
The Medicare Advantage segment continues experiencing higher-than-expected cost pressures and utilization spikes. These issues have become a key concern for management and investors alike.
CEO Stephen Hemsley acknowledged both external market forces and internal oversights contributed to recent struggles. He emphasized that most issues remain within the company’s control to fix.
Wall Street analysts maintain cautious optimism about UnitedHealth’s prospects. The stock carries a “Moderate Buy” consensus rating from 24 analysts covering the company.
Fifteen analysts rate the stock as “Strong Buy,” while two recommend “Moderate Buy” and seven suggest “Hold.” The average price target of $363.43 represents 16% upside potential.
The Street-high target of $440 suggests potential gains of 41% from current levels. However, analysts remain wary of near-term volatility given ongoing challenges.
UnitedHealth will report Q2 results on Tuesday, July 29, before market open. Analysts forecast Q2 2025 EPS to fall 25% year-over-year to $5.08, while full fiscal year 2025 EPS is projected to decline 20% to $22.07.
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