UnitedHealth Earnings: 2025 Outlook Intact After Fatal Shooting of Key Leader

Key Morningstar Metrics for UnitedHealth Group

• Fair Value Estimate: $590.00
• Morningstar Rating: ★★★★
• Morningstar Economic Moat Rating: Narrow
• Morningstar Uncertainty Rating: Medium

What We Thought of UnitedHealth Group’s Earnings

About a month after the fatal shooting of its medical insurance segment leader, Brian Thompson, UnitedHealth Group UNH delivered fourth-quarter results that helped management meet its 2024 goals and keep its 2025 guidance intact.

Why it matters: With shares down somewhat in early trading, the market appeared disappointed that this typical overachiever merely hit these metrics while continuing to look for a successor to lead its medical insurance operations.

• Given recent events and the importance of this role, we are not surprised that management is still looking for a successor to Thompson, and we still view UnitedHealth’s bench as very deep.
• We think it is admirable that the MCO met 2024 goals, despite an elevated medical cost ratio that appeared to spook investors looking for signs of easing in this headwind.

The bottom line: We are maintaining our fair value estimate, and shares look moderately undervalued, despite some regulatory risks that have emerged since Thompson’s shooting.

• With the strongest economic profit margins in the managed care industry, UnitedHealth’s narrow moat rating appears intact.
• Potential regulatory changes, particularly in the firm’s top-tier pharmacy benefit management operations, add some risk to the situation. However, we would expect to maintain the company’s moat rating even in some high-risk, low-probability scenarios.

Coming up: Management’s goals for 2025 look achievable to us.

• In 2025, the company is aiming for $450 billion-$455 billion of revenue and $32 billion-$33 billion of operating cash flow, roughly in line with our expectations for the year.
• The firm also aims for $29.50-$30.00 of adjusted earnings per share, or 7%-8% growth, which is only slightly below our view and well below its long-term 13%-16% goal. Given UnitedHealth’s tendency to overachieve, we remain comfortable with our slightly higher EPS expectation, absent another unusual event.