UnitedHealth Group Incorporated (UNH), a leading player in the healthcare sector, found itself in uncharted waters after its Q1 2025 results fell short of management's expectations. An unexpected spike in Medicare Advantage costs rattled the company, prompting a significant setback on April 17. The company’s stock plummeted by around $130 - its steepest single-day drop in over 25 years. 

Shares dropped 22.38%, marking the worst daily decline since 1998. The root of the trouble lay in higher-than-expected physician and outpatient service usage under UnitedHealthcare’s Medicare Advantage plans. Despite the turbulence, management is not throwing in the towel. They called these pressures “highly addressable” and expect recovery to take shape through 2026. 

So, is the pullback in UNH an opportunity to buy the dip?

About UnitedHealth Stock

The Eden Prairie, Minnesota-based healthcare behemoth, UnitedHealth Group Incorporated (UNH), stands tall as a healthcare powerhouse, commanding influence through its flagship insurer, UnitedHealthcare, which provides coverage to more than 50 million individuals across the nation. 

With a formidable market cap of $415.4 billion, the Dow Jones Industrial Average ($DOWI) component also operates a major pharmacy benefit manager (PBM) overseeing prescription drug coverage and continues to expand its Optum segment, which combines care delivery with technical expertise to support healthcare systems.

On April 17, UnitedHealth reported disappointing Q1 earnings and trimmed its full-year guidance, triggering a single-day crash of more than 22% in its hare price - its fourth-worst performance since listing in 1984. 

Year-to-date, UNH is down 20.7%. Earlier today, the stock set a new 52-week low of $399.86, but recovered to close narrowly above $400. 

UNH trades at just 15.97 times forward-adjusted earnings and 0.92 times forward sales, both below industry averages and significantly discounted compared to the stock's five-year historical multiples. However, the discounted valuation also reflects UNH's declining share price. The stock is negative over the last two-year and three-year periods, lagging gains in the broader market by a big margin.

As a silver lining, UnitedHealth pays an annualized forward dividend of $8.40 per share, and currently yields 1.85%. The company has grown its dividend payments for 15 consecutive years. Its most recent cash dividend of $2.10 per share was paid on March 18.

UnitedHealth Misses on Q1 Earnings

On April 17, UnitedHealth reported Q1 2025 earnings that missed analysts' estimates on both the top and bottom lines. Revenue grew 9.8% year over year to $109.6 billion, compared to analyst estimates of $111.5 billion. 

Delving deeper, the UnitedHealthcare segment’s Q1 revenues amounted to $84.6 billion, marking a 12.2% increase compared to the previous year. On the other hand, Optum, the company’s health services arm, posted Q1 revenues of $63.9 billion, a 4.6% rise, with Optum Rx contributing significantly to this growth. 

The company’s total operating costs grew by 9.4% year over year to $100.5 billion, reflecting the expanding scale of operations. UnitedHealth’s adjusted EPS grew 4.2% from the previous year’s period to $7.20, missing Wall Street's expectation of $7.29. 

The healthcare giant downwardly revised its 2025 outlook to call for adjusted earnings of $26 to $26.50 per share, a decrease from the initially forecast range of $29.50 to $30 in December 2024.

What Do Analysts Expect for UnitedHealth Stock?

After earnings, Jefferies cut its price target on UNH to $530 from $609, but maintained a “Buy” rating. Likewise, TD Cowen cut UNH's price target to $520 from $609, while analysts at Oppenheimer and KeyBanc also handed out price-target cuts. The average price target of $564.12 represents potential upside of 40.7%.

As it stands, UNH boasts a “Strong Buy” rating. Out of 25 analysts covering the stock, 22 advocate a “Strong Buy,” while two lean toward a “Moderate Buy.” One more calls the stock a “Hold.”

In light of the stock's long-term underperformance, the company's downwardly revised guidance, and current regulatory uncertainty surrounding PBMs, investors may prefer to seek out more compelling dividend stocks than UNH right now.