[Earnings Summary] UnitedHealth's turnaround is underway—what is the target price for the future?

The leading company in the U.S. healthcare industry-- $UnitedHealth (UNH.US)$ , has just experienced a sharp decline over the past year.

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On December 2, 2024, the company’s CEO was assassinated, exposing public dissatisfaction with its insurance claims practices; this was followed by bearish comments from Bill Ackman and weaker-than-expected Q1 2025 earnings, causing the stock price to plummet continuously, wiping out half of the market capitalization.

A turning point emerged after the Q2 results,when Warren Buffett disclosed a bottom-fishing purchase of $UnitedHealth (UNH.US)$ , boosting market confidence significantly and triggering a rebound in the stock price, marking a reversal.

However, will this rebound continue? How should we set the target price specifically? Let’s analyze based on the latest Q3 earnings! Fellow investors are welcome to share more insights in the comment section.

Q3 overall performance exceeded expectations, with revenue surpassing $113 billion, representing a 12% year-over-year increase, and adjusted EPS at $2.92, slightly above forecasts.The two core business segments, UnitedHealth and Optum, grew by 16% and 8%, respectively.

Based on overall optimistic performance, the company has raised its profit expectations, projecting that the full-year 2025 earnings per share (EPS) will increase to at least $14.90, with adjusted EPS of at least $16.25. This appears to instill confidence in the market, signaling a shift from "crisis mode" to a "recovery track."

In fact, from 2022 to 2023, UnitedHealth Group’s (UNH) revenue growth consistently remained above 12%, primarily driven by its unique health insurance plus healthcare services model. The insurance business provides stable coverage for customers, while Optum leverages its extensive network and data analytics capabilities to help the company price more accurately and control medical costs, reducing the medical loss ratio to 81.6% in Q3 2022.

More importantly, in addition to revenue growth, operating profit performance has also been commendable. This is related to the continued increase in the proportion of the higher-margin Optum business, which has enhanced overall profitability.

The relatively lackluster revenue performance in 2024 can be attributed to several core factors: a slowdown in the growth of Medicare Advantage enrollees, rising medical costs, federal policy adjustments, as well as internal management and trust crises within the company.

Looking at Q3 2025 revenue, growth was strong, driven by membership expansion in the insurance business (UnitedHealthcare) and contributions from Optum's pharmacy operations. Operating profit reached $4.3 billion, with adjusted EPS at $2.92, surpassing the expected $2.75, indicating signs of a rebound after hitting bottom. Additionally,Q3 medical loss ratiorose to 89.9%, up significantly from 85.2% in the same period last year, but this was fully in line with management’s guidance provided in Q2. This indicates that the risk of cost overruns has been brought under control, alleviating market concerns about uncertainties.

Specifically examining the two core businesses: UnitedHealthcare and Optum.

UnitedHealthcare primarily offers health insurance services to its members, covering employer and individual plans, Medicare and retirement solutions, and community and state government programs.

As the cornerstone of UNH’s revenue, the insurance business generated $87.1 billion in Q3 revenue, a 16% year-over-year increase, mainly benefiting from growth in Medicare and Medicaid membership. However, Q3 operating profit amounted to only $1.8 billion, a substantial 57% decline year-over-year, primarily due to rising medical costs and reductions in government healthcare funding.

Although short-term profits are under pressure, its membership has grown steadily, with the number of domestic service consumers reaching 50.1 million, an increase of 795,000 from the previous year, indicating that core insurance demand remains strong.

The other major pillar business, Optum, primarily consists of three key segments: OptumHealth, OptumInsight, and OptumRx.

Among these, OptumHealth provides medical services through local healthcare and outpatient care systems, including primary care, specialized care, emergency, and surgical care; OptumInsight offers data analysis and research consulting services to hospitals, physicians, health insurers, governments, and others; while OptumRx delivers diversified pharmacy care services.

Optum's revenue for this quarter was $69.2 billion, representing an 8% year-on-year increase, mainly driven by OptumRx. Specifically, OptumRx generated $39.7 billion in revenue, a 16% year-on-year growth, while OptumHealth and OptumInsight reported revenues of $25.9 billion and $4.9 billion respectively, which were largely flat compared to last year. The growth momentum of OptumRx came from increased prescription volumes from new clients, expansion of existing clients, and the growth of pharmacy services.

In addition,This quarter, Optum’s operating profit reached $2.5 billion, accounting for 58% of the company’s total, with its diversified business model providing a hedge against the weakness in the insurance business and becoming a key driver of future profit growth.

In terms of cash flow, Q3 operating cash flow was $5.9 billion, down 58% from the same period last year but still 2.36 times net income, reflecting UnitedHealth Group’s healthy financial condition, capable of supporting business investments and shareholder returns.

Additionally, the company’s current price-to-earnings (P/E) ratio is approximately 18.6, lower than the industry average. Over the past five years, the historical P/E ratio has only exceeded the current level 11% of the time, suggesting that the current P/E ratio is at a relatively low historical level, warranting close attention from investors.

In summary, the Q3 performance was solid, especially with the upward revision of the full-year 2025 EPS guidance, signaling management's confidence in the recovery.

Key risks for investors to monitor include the company’s ability to control medical loss ratios. If the ratio falls below 89% in the next quarter, it would be a strong signal of effective cost control. Additionally, regulatory pressures remain a concern, as the U.S. Department of Justice’s investigation into the Medicare Advantage business is ongoing, and uncertainty regarding its outcome could weigh on the stock price.

From a technical perspective, $UnitedHealth (UNH.US)$ After undergoing a deep retracement since December 2024, the stock price began to recover in August this year. The daily moving averages have now entered a bullish trend. How can one determine resistance levels and target prices?

We can refer to the Fibonacci retracement lines, using the weekly candlestick chart as an example (see the above chart).The current stock price has rebounded to the key level of 38.2% on the Fibonacci retracement line, forming resistance at the weekly level. If this key level is subsequently broken, the next target could be considered as the 50% level (approximately $425).Additionally, considering the RSI, its reference value is 50, which has not yet entered the overbought stage, indicating a continued probability of rebound.

Of course, no technical analysis is infallible. The above analysis is for educational purposes only and should not be considered as actual investment advice.

Fellow investors with higher risk tolerance may also use options tools to leverage small investments for potentially larger returns.

If fellow investors are optimistic about $UnitedHealth (UNH.US)$ 's long-term trend but the stock’s short-term fluctuations are relatively small, several strategies can be adopted during the wait for an upward movement to reduce holding costs, generate additional income, or build positions at a lower cost.

One scenario is that when we hold UnitedHealth (UNH) shares, we can consider implementing a Covered Call strategy. If we expect the share price to rise slightly over a period of time, we may choose to sell out-of-the-money call options to collect premiums, thereby reducing the cost of holding the shares.

Another scenario is when we do not currently hold the underlying stock, and if we are willing to buy the underlying stock at a lower price in the future, then shorting a put option is an appropriate strategy. We can choose to sell out-of-the-money puts, earning the premium if the stock price remains stable or rises; if the stock price falls below the strike price, we take delivery of the stock.$UnitedHealth (UNH.US)$If we expect the stock price to rise moderately in the future, a Bull Call Spread strategy can also be adopted by choosing to "buy Call A" + "sell Call B," where the strike price of Call A < strike price of Call B. "Buying Call A" serves to capitalize on the bullish expectation, profiting from the rise in the underlying stock, while "selling Call B" aims to reduce the cost of "buying Call A."

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[Options Strategies, fellow investors are also encouraged to share their investment views on , so that everyone can exchange ideas and learn together.$UnitedHealth (UNH.US)$的投資觀點，大家一起交流學習。

Risk Disclosure: This content does not constitute a research report and is provided for reference only. It should not be relied upon as a basis for any investment decision. The information contained herein does not represent a comprehensive description of the securities, markets, or developments discussed. While the sources of information are deemed reliable, no guarantee is made regarding the accuracy or completeness of the content provided. Furthermore, no assurance is given concerning the accuracy of any statements, opinions, or forecasts presented in this document.

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