Leerink Partners Cuts Price target on UnitedHealth Group (UNH) Following 1c EPS Beat

Leerink Partners maintained an Outperform UnitedHealth Group (NYSE: UNH), and cut the price target to $150.00 (from $160.00), following the company's 3Q15 earnings results. 3Q EPS of $1.65 beat consensus by a penny.

Analyst Ana Gupte commented, "UNH reported an in-line though high quality quarter. Consolidated MLR, which saw a meaningful deterioration in 2Q, encouragingly improved QoQ with FY15 MLR guided above the midpoint of guidance range. Management also directionally guided to at least inline EPS for 2016 at $7.35 that represents 15% YoY EPS growth, while a move to Cash EPS offers as much as 55c optionality to the upside. The results support our view of improving MCO fundamentals for 2016 as ACA reimbursement headwinds subside, Exchange margins normalize and UNH enjoys Medicare Advantage growth and margin normalization and CTRX synergies. The initial guide on Dec. 1 I-Day is likely to be conservative per call commentary. We maintain our 2015E EPS at $6.35. We lower our 2016E EPS to $7.35 from $7.55, though we view $7.55 as a highly likely bull case. Our medium-term growth rate on revenue, earnings and EPS is 14%, 11% and 14%, respectively. We continue to view UNH as a suitable investment in particular for generalist "Buy and Hold" investors given positive interest rate leverage, low leverage ratios and domestic focus. Downside risks are the potential loss of the CI PBM contract by Optum Rx should ANTM (OP)-CI (OP) close in 2016 that will modestly impact earnings and see some multiple compression. Upside risks are accretive take-out of MOH (OP), WCG (OP) or even CNC (OP)- HNT (MP) by UNH, which we see as possible in the next 12-18 months. We reiterate our OP rating on UNH and lower our PT to $150 (from $160) to reflect the macro-sell-off in Healthcare and the absence of near-term catalysts."

For an analyst ratings summary and ratings history on UnitedHealth Group click here. For more ratings news on UnitedHealth Group click here.

Shares of UnitedHealth Group closed at $120.17 yesterday.

You May Also Be Interested In

• HSBC Downgrades Feng Tay Enterprises (9910:TT) to Hold
• Alpine Income Property Trust (PINE) PT Lowered to $18 at Jones Trading
• Piper Sandler Downgrades Magnolia Oil & Gas Corp. (MGY) to Neutral