UnitedHealth Group Inc (NYSE:UNH, XETRA:UNH) shares rose more than 5% to about $397 on Thursday after Bank of America upgraded the stock to ‘Buy,’ citing improving medical cost trends and a more favorable risk-reward setup heading into upcoming earnings.
The firm also raised its price target to $450 and lifted earnings estimates for 2026 and 2027.
The bank’s analysts highlighted strengthening near-term data points across the managed care sector, which they said could support a broader rally in Medicare Advantage (MCO) names, with UnitedHealth positioned as a potential leader.
They also pointed to improved visibility in margin recovery and recent utilization trends.
The analysts wrote that “improving medical cost trends and supportive near-term data points set up a favorable Q2 earnings setup and attractive risk/reward.”
They added that if utilization trends continue to moderate, UnitedHealth’s scale and market position could allow it to lead a broader sector recovery.
The firm also emphasized that incoming data suggest the recent strength in Q1 results may not have been driven solely by temporary factors such as weaker flu activity and weather disruptions. They wrote that proprietary tracking data and recent industry commentary indicate signs of April and May utilization moderation, which supports a more constructive view into Q2.
Bank of America also noted that UnitedHealth’s earnings power remains meaningfully above current guidance levels, suggesting potential upside as margins normalize over time. The firm indicated that longer-term earnings capacity could exceed consensus expectations if margin targets are achieved across key business segments.
However, the note flagged ongoing risks, including Medicare Advantage star ratings and 2028 rate proposals. They wrote that while these factors remain important uncertainties, their impact could be more manageable if industry-wide cost trends continue to ease and if margins improve ahead of regulatory changes.