Leerink Partners Raises Price Target on UnitedHealth Group (UNH) to $195; Reiterates Outperform
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Leerink Partners reiterated an Outperform rating on UnitedHealth Group (NYSE: UNH), and raised the price target to $195.00 (from $185.00), following a company update. EPS guidance of $9.30 - $9.60 came in better than the Street expectation of $9.16. The EPS upside is driven by better than expected top-line growth in MA, and Optum as well as the ObamaCare tax holiday.
Analyst Ana Gupte, commented, "We remain bullish on UNH (OP) and reiterate our top pick status on the name while raising estimates and PT to $195. In addition to surprising meaningfully to the upside on 2017 guidance, beyond our already heightened expectations, the I Day -- which included useful breakout sessions on topics such as Healthcare policy, Optum Care, Specialty Rx and management dinner with CFO John Rex and Head of External Affairs Corey Alexander -- underscored our view that the company has moved so far ahead of its peers, that it richly deserves to decouple from its peers and deserves at least a market multiple. The company's unique platform across unregulated Optum that is bending cost trend and the core Health Benefits in our view has become seamless and palpably better together. The small company culture is fostered at the highest levels through "doers" and not "overseers" with appropriate incentive alignment. In addition to serving a social and intensely regulated marketplace, and driving profitable growth at 13-16% longer term on EPS, the focus on the customer through NPS scores and strategic relationships across WAG (OP), now CVS (OP), Quest Dx and the VA, becomes even more starkly apparent. Guidance surprised on better topline growth in Medicare Advantage, and Optum with the ObamaCare tax holiday that is poised for permanent repeal. We are raising our 2017 EPS estimate to $9.45 with possibility of bull case EPS of $9.75, and 2018E EPS to $10.50 from $10.31. Corporate tax reform and Interest rate upside to depressed investment yields are an added tailwind while downside risk from Repeal and Replace is minimal at 1% from worst case rollback of Medicaid expansion, while the company has already exited HIX marketplaces. Our PT of $195 (up from $185) reflects both EPS upside and multiple expansion on the strength of the company's unique success coupled with a more health insurance friendly regime."
Shares of UnitedHealth Group closed at $157.59 yesterday.
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