UnitedHealth Group Analyst Roundup Following Investor Day

UnitedHealth Group Inc. UNH hosted its annual Investor Day in New York on Tuesday “and provided detailed 2015 guidance including EPS of $6.00-$6.25 (bracketing consensus of $6.13), with growth continuing to be fueled by Optum, as ACA taxes/fees and MA pressure stunt UHC segment growth, albeit at a lesser rate,” according to Credit Suisse.

UnitedHealth Group’s stock reacted positively following the event and was up 1.77 percent Wednesday at $101.22.

Analysts commented on the company after the Investor Day, below are highlights along with current ratings and price targets.

Credit Suisse - Outperform, $110 price target

“The event was upbeat with management suggesting a “change in tone” as headwinds become more muted, momentum builds, and as revenue and earnings accelerate. To that end, the company expects 2016 EPS to accelerate above ’15 growth levels and should get back to hitting its l-t EPS growth target of 13-16 percent, in our opinion. We continue to see UNH as well positioned given its diversification, top market share across business lines (Commercial, Medicare, Medicaid), more and growing Optum opportunities, and strong balance sheet and capital deployment.”

Oppenheimer - Outperform, $108 price target

“UNH plans to launch exchange products in 23 states in 2015 (vs. four states in 2014), significantly expanding its footprint in the individual business. At last year's investor day, UNH indicated that year one would be valuable for learning pricing, product configuration, and market size around the exchanges and it would expand upon its modest footprint in 2015. Since the company sees a good long-term growth opportunity from the business and believes a sustainable market is developing, it is aggressively expanding its presence by participating in 23 states, which represent 54 percent of the national exchange opportunity.”

Cantor Fitzgerald - Hold, $100 price target

“UNH expects its share of the managed care industry's non-deductible ACA insurer tax to reach $1.3 billion in 2014 and $1.8 billion in 2015. This is on top of $460 million of reinsurance in 2014 and an estimated $320 million in 2015. A portion of the tax (but not the fees) can ultimately be recouped from state Medicaid programs, but UNH says these two headwinds will cost $0.70 per share in 2014 and $0.15 per share in 2015.”

Sterne Agee - Underperform, $87 price target

“UnitedHealthcare after-tax profits are expected to be $3.8-$4.0 billion, which is essentially flat with the $3.9 billion outlook for 2014. Overall EPS growth of ~7-10 percent is driven by Optum and capital allocation. Optum is expected to deliver 15-18 percent earnings growth in 2015 on 105-7 percent to 13 percent top-line growth with the operating margin going from 6.9 percent in 2014 to 7.4 percent in 2015. Driving the top-line growth for Optum is OptumHealth (~20 percent) with OptumInsight revenue expected to be up ~13 percent and OptumRx top line up ~8 percent. OptumHealth earnings are seen up ~21 percent, OptumInsight earnings are expected to rise ~20 percent, and OptumRx earnings are forecast to rise ~11 percent. Overall Optum revenue is expected to rise ~11 percent in 2015 with ~17 percent growth in operating earnings.”