UnitedHealth (NYSE:UNH) heads into its first-quarter report tomorrow before the market opens, with investors hoping to avoid a repeat of the late-January reaction to its 4Q25 release, when the stock tumbled nearly 20%.
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At the time, the company reported Q4 revenue and a full-year revenue guide that came in below Street expectations, adding pressure to a sector already dealing with an unfavorable Medicare rate decision.
In January, the Centers for Medicare & Medicaid Services (CMS) put forward a proposal suggesting roughly flat reimbursement rates for Medicare Advantage insurers in 2027. However, earlier this month, CMS set a final and more favorable-than-expected rate for 2027. While the initially proposed average increase for Medicare Advantage plans was just 0.09%, the final decision reflected a 2.48% rise.
Thus, heading into the Q1 readout, Morgan Stanley’s Erin Wright, an analyst who ranks among the top 3% on Wall Street, notes that while sentiment toward UNH and managed care more generally remains “cautious and fatigued,” at the same time, she is starting to see “signs of this alleviating.” And that makes the stock more appealing.
“We are moving UNH to our Top Pick based on improved clarity following the final Medicare Advantage rate notice, supporting continued progress in its MA margin improvement story, growing conviction in its Optum Health turnaround, and likely building evidence of AI-driven efficiencies (over time),” the analyst noted.
More specifically regarding Q1, Wright thinks a print that is broadly in line with expectations should be “enough for the stock to work.” Wright expects a more “tangible profit tailwind” in 2027–2028, driven by the streamlining of the risk platform and the maturation of VBC cohorts. On MLR (Medical Loss Ratio), Wright forecasts 85.3% in Q1 vs. consensus at 85.5%, and will be monitoring for signals of underlying utilization trends across product groups.
Looking at the big picture, Wright continues to believe UNH has strengthened its operational position and is well placed to “strategically adapt” its Medicare Advantage book, including through potential benefit and footprint adjustments in 2027 to help protect margins. The analyst also expects the Optum Health turnaround to become more visible over the course of this year as restructuring efforts continue, with further margin improvement now largely dependent on execution – an area where her confidence has been building.
“Although the upside to the final MA rate notice (~+240bps improvement from Advance) helped abate some MCO trepidation, stringing together a few clean quarters for UNH will go a long way to generate broader interest in the stock,” the 5-star analyst summed up.
To this end, Wright assigns UNH shares an Overweight (i.e., Buy) rating, backed by a $375 price target. Should the figure be met, investors will be pocketing returns of 15.5% a year from now. (To watch Wright’s track record, click here)
Elsewhere on the Street, the stock claims an additional 17 Buys and 5 Holds, for a Strong Buy consensus rating. At $367.81, the average price target points toward 12-month returns of 13%. (See UNH stock forecast)
Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.