UnitedHealth: Despite Tragedy, Transition Should Be Smooth

Key Morningstar Metrics for UnitedHealth Group

• Fair Value Estimate: $590.00
• Morningstar Rating: 3 stars
• Morningstar Economic Moat Rating: Narrow
• Morningstar Uncertainty Rating: Medium

UnitedHealth Group’s UNH annual investor day on Dec. 4, 2024, was cut short by the fatal shooting of Brian Thompson, the company’s medical insurance segment leader. Thompson had led this segment, which insures more Americans than any other company, for three years. He was a 20-year veteran of the company, with previous experience leading the segment’s government plans. Citing police, The New York Times reported that the shooting appeared targeted, although details are scarce at this time.

From a corporate viewpoint, investors should know that UnitedHealth’s management bench is typically quite deep. We expect the company to smoothly transition Thompson’s role to an internal candidate under the direction of CEO Andrew Witty.

Before the shooting, UnitedHealth delivered a near-term view of its financial prospects roughly in line with our estimates. However, to recognize recent cash flows and a slightly higher outlook for long-term growth beyond our explicit forecast period, which we think better reflects the firm’s high-quality businesses and exemplary capital allocation, we are boosting our fair value estimate to $590 per share from $550. Shares still trade close to our fair value estimate.

UnitedHealth’s near-term guidance remains in line with the projections previewed on its third-quarter earnings call, and our estimates look close to those goals. For 2024, the firm still expects 9%-10% growth in adjusted EPS to $27.50-$27.75, despite absorbing $0.75 per share from Change-related business disruption effects. For 2025, the firm expects mid-to-high-single-digit adjusted EPS growth to $29.50-$30.00, slightly lower than our estimate. We remain comfortable with our higher view, especially since UnitedHealth regularly exceeds its initial expectations.