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UnitedHealth Spirals Downward Amid New Criminal Probe: Time to Sell?
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UnitedHealth Group Incorporated (UNH - Free Report) is facing a wave of challenges, with little room to catch a break. The latest blow? A criminal investigation into possible Medicare fraud was reported by the Wall Street Journal. This comes on the heels of a disappointing first-quarter performance, where the company missed both earnings and revenue estimates. Rising costs, primarily tied to Medicare Advantage plans and the Optum health services segment, and higher utilization trends, are weighing heavily on margins.
In a further sign of uncertainty, UnitedHealth withdrew its 2025 financial guidance. The sudden leadership shake-up also adds to the mix, with former CEO Andrew Witty, who joined in 2021, stepping down and longtime leader Stephen Hemsley returning to the helm. Over the past week, UNH shares have plunged 21.2%, bringing its year-to-date decline to 39.1%, significantly underperforming both the industry (-28.2%) and the S&P 500 (-0.6%). In comparison, peer Humana Inc. (HUM - Free Report) dropped 9.1%, while Elevance Health, Inc. (ELV - Free Report) actually gained 1.5%.
This is not the first time UnitedHealth has been in the spotlight for the wrong reasons. The company had suffered a fallout from a 2024 cyberattack on its tech division, which resulted in a massive data breach and a subsequent federal investigation. Adding to the list: the tragic killing of its insurance unit CEO Brian Thompson, a public backlash against the industry, and the legal roadblock to its $3.3 billion Amedisys acquisition.
Now, the Department of Justice is investigating the company for potential Medicare fraud, according to the WSJ, a probe that reportedly began last summer. While the details remain unclear, this follows a February inquiry launched by Senator Chuck Grassley into UnitedHealth’s Medicare billing practices.
The stock is trading below both its 50-day and 200-day moving averages: technical signals that indicate sustained downward momentum.
UNH’s Unfavorable Estimate Revisions
Unsurprisingly, analyst sentiment has turned negative. The Zacks Consensus Estimate for UNH’s 2025 EPS has seen 13 downward revisions in the past month, while the 2026 EPS estimate has seen 11, without a single upward revision. Earnings for 2025 are now projected to decline by 4.7%, even as revenues are still expected to climb 13.1% year over year. (See the Zacks Earnings Calendar to stay ahead of market-making news.)
Image Source: Zacks Investment Research
UNH’s Valuation Still Rich
Despite the selloff, UNH remains expensive. The stock currently trades at a forward P/E of 11.16X, above the industry average of 10.87X. By comparison, Humana trades at 14.88X and Elevance at 10.35X, placing UnitedHealth somewhere in the middle despite the selloff.
Image Source: Zacks Investment Research
Is There a Path Forward for UnitedHealth?
Despite recent setbacks, UnitedHealth still commands a dominant position in the healthcare space, thanks to its vertically integrated model and diversified operations. The return of 72-year-old Stephen Hemsley, who previously led the company from 2006 to 2017, could bring needed stability and strategic clarity, although a turnaround will take time.
There are also potential tailwinds on the horizon. Medicare Advantage rate hikes projected for 2026 could improve margins across the insurance space. UnitedHealth is also investing in AI and digital health tools to enhance consumer experience and streamline operations, initiatives that may improve efficiency and lower long-term costs.
The company’s scale remains unmatched. As of March 31, 2025, its UnitedHealthcare business served 50.1 million people, up 1.9% year over year, driven by growth in self-funded commercial benefits. With U.S. healthcare spending on the rise due to aging demographics and increased disease prevalence, UnitedHealth is well-positioned to benefit from long-term industry trends.
Financially, the company remains strong. It generated $5.5 billion in operating cash flow in the first quarter, up significantly from $1.1 billion the year prior and ended the quarter with $34.3 billion in cash and short-term investments. It also returned over $5 billion to shareholders through dividends and stock buybacks.
Final Verdict: Avoid UNH Until the Dust Settles
UnitedHealth’s recent string of setbacks — from regulatory investigations and leadership changes to cost pressures and guidance withdrawal — has created a cloud of uncertainty over its near-term outlook. Despite its strong market presence and solid cash generation, these issues are weighing heavily on sentiment and investor confidence. The ongoing legal scrutiny and the earnings estimate cuts further erode visibility into a stable recovery.
Given the stock’s recent underperformance, premium valuation and lack of immediate positive catalysts, UnitedHealth currently carries a Zacks Rank #4 (Sell). Investors may be better off waiting for clearer signs of stability before considering re-entry.
Image: Bigstock
UnitedHealth Spirals Downward Amid New Criminal Probe: Time to Sell?
UnitedHealth Group Incorporated (UNH - Free Report) is facing a wave of challenges, with little room to catch a break. The latest blow? A criminal investigation into possible Medicare fraud was reported by the Wall Street Journal. This comes on the heels of a disappointing first-quarter performance, where the company missed both earnings and revenue estimates. Rising costs, primarily tied to Medicare Advantage plans and the Optum health services segment, and higher utilization trends, are weighing heavily on margins.
In a further sign of uncertainty, UnitedHealth withdrew its 2025 financial guidance. The sudden leadership shake-up also adds to the mix, with former CEO Andrew Witty, who joined in 2021, stepping down and longtime leader Stephen Hemsley returning to the helm. Over the past week, UNH shares have plunged 21.2%, bringing its year-to-date decline to 39.1%, significantly underperforming both the industry (-28.2%) and the S&P 500 (-0.6%). In comparison, peer Humana Inc. (HUM - Free Report) dropped 9.1%, while Elevance Health, Inc. (ELV - Free Report) actually gained 1.5%.
YTD Price Performance - UNH, HUM, ELV, Industry & S&P 500
This is not the first time UnitedHealth has been in the spotlight for the wrong reasons. The company had suffered a fallout from a 2024 cyberattack on its tech division, which resulted in a massive data breach and a subsequent federal investigation. Adding to the list: the tragic killing of its insurance unit CEO Brian Thompson, a public backlash against the industry, and the legal roadblock to its $3.3 billion Amedisys acquisition.
Now, the Department of Justice is investigating the company for potential Medicare fraud, according to the WSJ, a probe that reportedly began last summer. While the details remain unclear, this follows a February inquiry launched by Senator Chuck Grassley into UnitedHealth’s Medicare billing practices.
The stock is trading below both its 50-day and 200-day moving averages: technical signals that indicate sustained downward momentum.
UNH’s Unfavorable Estimate Revisions
Unsurprisingly, analyst sentiment has turned negative. The Zacks Consensus Estimate for UNH’s 2025 EPS has seen 13 downward revisions in the past month, while the 2026 EPS estimate has seen 11, without a single upward revision. Earnings for 2025 are now projected to decline by 4.7%, even as revenues are still expected to climb 13.1% year over year. (See the Zacks Earnings Calendar to stay ahead of market-making news.)
UNH’s Valuation Still Rich
Despite the selloff, UNH remains expensive. The stock currently trades at a forward P/E of 11.16X, above the industry average of 10.87X. By comparison, Humana trades at 14.88X and Elevance at 10.35X, placing UnitedHealth somewhere in the middle despite the selloff.
Is There a Path Forward for UnitedHealth?
Despite recent setbacks, UnitedHealth still commands a dominant position in the healthcare space, thanks to its vertically integrated model and diversified operations. The return of 72-year-old Stephen Hemsley, who previously led the company from 2006 to 2017, could bring needed stability and strategic clarity, although a turnaround will take time.
There are also potential tailwinds on the horizon. Medicare Advantage rate hikes projected for 2026 could improve margins across the insurance space. UnitedHealth is also investing in AI and digital health tools to enhance consumer experience and streamline operations, initiatives that may improve efficiency and lower long-term costs.
The company’s scale remains unmatched. As of March 31, 2025, its UnitedHealthcare business served 50.1 million people, up 1.9% year over year, driven by growth in self-funded commercial benefits. With U.S. healthcare spending on the rise due to aging demographics and increased disease prevalence, UnitedHealth is well-positioned to benefit from long-term industry trends.
Financially, the company remains strong. It generated $5.5 billion in operating cash flow in the first quarter, up significantly from $1.1 billion the year prior and ended the quarter with $34.3 billion in cash and short-term investments. It also returned over $5 billion to shareholders through dividends and stock buybacks.
Final Verdict: Avoid UNH Until the Dust Settles
UnitedHealth’s recent string of setbacks — from regulatory investigations and leadership changes to cost pressures and guidance withdrawal — has created a cloud of uncertainty over its near-term outlook. Despite its strong market presence and solid cash generation, these issues are weighing heavily on sentiment and investor confidence. The ongoing legal scrutiny and the earnings estimate cuts further erode visibility into a stable recovery.
Given the stock’s recent underperformance, premium valuation and lack of immediate positive catalysts, UnitedHealth currently carries a Zacks Rank #4 (Sell). Investors may be better off waiting for clearer signs of stability before considering re-entry.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.