Bernstein: UNH — Final MA Rate Improvement Drives Better Outlook; Outperform Maintained, PT Raised 2%

Bernstein maintains its Outperform rating on UnitedHealth Group (UNH) and raises the target price from $405 to $411, representing approximately 46% upside from the current share price of $281.36. This upward revision follows the Centers for Medicare and Medicaid Services' release of the final 2027 Medicare Advantage (MA) rate notice. The final risk-adjusted rate stands at 2.48%, dramatically exceeding the preliminary rate of 0.09%. This improvement primarily stems from delayed risk-model revisions. Bernstein estimates this will boost the 2027 MA MLR and margin forecasts by roughly 25 basis points above previous expectations. Consequently, the 2027 EPS forecast increases by 1.4%, moving from $20.77 to $21.07. The target price is derived by applying an unchanged 19.5x forward P/E multiple to the updated next-twelve-month EPS estimate. The firm expects UnitedHealth to continue limiting benefit growth, selectively entering markets, and enhancing utilization management. While 2027 MA membership growth is projected to remain modest at roughly 1% due to pricing discipline, the first-quarter 2026 earnings report is anticipated to sustain positive momentum in MA and cost control. Broader investment themes include a projected recovery in UHC margins from trough levels between 2026 and 2028.