UnitedHealth Stock Slides as Analyst Warns of Risk to Optum Division
Baird downgrades UNH to 'Underperform,' citing significant headwinds for the company's key growth driver from new Medicare Advantage rules.
UnitedHealth Group (NYSE: UNH) shares faced significant selling pressure after a dire warning from a Wall Street analyst, who cautioned that the company's high-growth Optum Health division could be 'structurally impaired' by new federal regulations. In response to the concerns, Baird from 'Neutral' and sharply cut its price target.
The downgrade centers on the financial impact of , which are being phased in over three years. Baird analyst Michael Ha noted that UnitedHealth had historically been more aggressive than peers in using diagnostic codes to secure higher risk scores and payments. The new CMS model eliminates thousands of these coding categories, neutralizing a key advantage for the healthcare giant.
Baird's analysis projects a severe financial toll, estimating the total impact on UnitedHealth could be . This has already prompted a reduction in Optum Health's long-term margin guidance from a range of 8-10% down to 6-8%, with the analyst expressing low confidence in the company's ability to maintain even 1% value-based care margins by 2026 without significant changes.
The concerns extend beyond the Optum division. The Baird report also flagged what it described as troubling accounting practices, pointing to UnitedHealth’s inclusion of '$3.3 billion in 'gain on sale of assets' within its 2024 operating earnings. These warnings were compounded by the company's recent second-quarter earnings, which missed estimates, and a full-year forecast that , intensifying investor concerns about the company's growth trajectory amid the new regulatory landscape.