UnitedHealth Group: Uncertainties Through 2025 Reiterate Buy Opportunity

Core Viewpoint - UnitedHealth Group (UNH) remains an attractive investment opportunity despite near-term challenges, including regulatory fines and cybersecurity costs, with a maintained Buy rating due to strong earnings and optimistic guidance for FY2024 [2][10]. Group 1: Financial Performance and Guidance - UNH reported a guidance for FY2024 adjusted EPS of $27.75, reflecting a 10.4% year-over-year increase, excluding costs related to the cyberattack and Brazil divestiture [5]. - The company continues to show robust financial performance, with a strong balance sheet featuring cash and short-term investments of $32.7 billion, allowing for rapid response to challenges [9]. - The stock is trading near a fair value estimate of $491.80, with a long-term price target of $674.70, indicating a potential upside of 39.2% [10]. Group 2: Cybersecurity Impact - The cyberattack may impact UNH's bottom line by up to $1.35 per share in FY2024, in addition to a $22 million ransomware payment [5]. - Management has implemented multi-factor authentication on external systems but has not provided extensive details on further cybersecurity measures [5]. - The company faces potential legal challenges, including a class action lawsuit related to the cyberattack, which may affect future financial performance [5]. Group 3: Brazil Divestiture - UNH plans to divest its Brazil segment by Q2'24, expecting a $7 billion impairment, primarily due to non-cash foreign currency translation losses [6]. - The Brazil segment represents only 1.5% of annual revenues and is unprofitable, suggesting that the divestiture could enhance the overall business profile [6]. - Management is confident in returning to baseline performance by 2025 after addressing the impacts of the cyberattack [6]. Group 4: Rising Medical Costs - UNH's Medical Care Ratio increased to 84.3%, up 2.1 points year-over-year, reflecting rising healthcare costs [7]. - Despite the increase, UNH maintains one of the lowest Medical Care Ratios compared to peers, indicating effective cost management [8]. - The company is expected to benefit from ongoing CMS recalculations, potentially unlocking up to $1 billion in additional bonus payments in 2025 [8].