Investing.com -- Bank of America upgraded UnitedHealth Group to Buy from Neutral and raised its price target to $450 from $420 per share in a note on Thursday, citing improving medical cost trends and a favorable setup heading into second-quarter earnings, analyst Kevin Fischbeck said.

The new target is based on 21.4x BofA's revised 2027 estimates, with the firm now above consensus for both 2026 and 2027.

"We are upgrading UNH to Buy as improving medical cost trends and supportive near-term data points set up a favorable 2Q earnings setup and attractive risk/reward," wrote Fischbeck.

BofA said incoming data points on utilization trends make it increasingly difficult to attribute the strong first quarter solely to weak flu activity and weather-related factors.

The firm pointed to its proprietary trend tracker, company commentary at a recent conference, and comments from Ardent Health on weak April and May utilization as evidence that cost trends are continuing to moderate.

"If utilization trends continue to moderate, UNH — given its bellwether status — should lead a broader MCO rally," Fischbeck wrote.

The firm highlighted that UnitedHealth's earnings power is approximately 50% above its 2026 guidance, and that sustained low utilization trends could accelerate the timeline for returning to target margins.

BofA believes the company's guidance toward the low end of target margins across all businesses by 2028 would imply earnings north of $26 per share, 5-10% above current consensus.

Medium-term risks remain, including 2028 Medicare Advantage star ratings and rate proposals, though BofA said margin recovery would significantly reduce the impact of potential rate pressure.