(By Balachander) UnitedHealth Group Inc. (NYSE: UNH) shares were upgraded to "Outperform" from "Perform" and price target raised to $66 from $63 by Oppenheimer.
The brokerage believes that UNH's current discounted multiples appear attractive in light of the overly-pessimistic outlook regarding the impact of the ACA, and the recent pull-back related to MA rates.
Further, Oppenheimer wrote it has increased confidence that FY2013 results will outperform expectations.
"With strong cash flow, a well-diversified portfolio and a strong track record of performance, we would be buyers of UNH," the brokerage wrote in a note.
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Oppenheimer said United's current portfolio provides diversification across a number of businesses with strong growth prospects. In particular, the company's opportunities within pharmacy, health IT and international markets are in areas where it still has low penetration, which should shield it from the risks around the new domestic health insurance regulations.
The company eased concerns around its relatively lower cost trend expectations by referring to the '13 pricing environment as stronger than '12, the brokerage said. Oppenheimer said that the company was still able to maintain UnitedHealthcare segment margins in '12, giving hope that FY2013 guidance for lower healthcare margins will prove conservative.
"Overall, UNH continues to perform well operationally, and although 2014 will likely be a hurdle, the company should outperform expectations.
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Furthermore, management has set impressive longer-term goals that include EPS growth of 13 percent-16 percent, which would certainly lead to outsized investor returns," Oppenheimer wrote.
Minnetonka, Minnesota-based UnitedHealth offers products and services through two platforms: UnitedHealthcare, which provides health care coverage and benefits services; and Optum, which provides information and technology-enabled health services.
The stock, which has been trading in the 52-week range of $50.32 to $60.75, slid 0.24 percent to trade at $55.08 on Thursday.