Raymond James moved UnitedHealth Group from Market Perform to Outperform and set a $330 target, citing a combination of artificial intelligence initiatives and expected margin improvement at the company's Optum Health business as the primary drivers for upside to earnings.
In its note, analyst John Ransom highlighted two central catalysts for the rating change: AI-led reductions in general and administrative (G&A) expenses and clearer margin visibility at Optum Health. The firm increased its EPS projections for 2027 and 2028 to $21.33 and $25.64, respectively, representing roughly 7.5% and 8% advantages over consensus estimates for those years.
Raymond James quantified modeled G&A improvement by assuming 20 basis points of progress per year in both 2027 and 2028. That assumption produces about $1 billion in annual savings relative to the firm's prior forecast, which had treated G&A as a flat share of revenue. The note further stated that every 100 basis points of G&A margin improvement equates to approximately $3.80 of per-share value.
The brokerage also outlined expectations for the Optum Health segment, projecting EBIT to rise from $2.2 billion in 2026 to $3.1 billion in 2028. Raymond James attributed that increase to clinic closures, the use of tighter physician networks and improvement in margins from external risk-based revenue.
On AI specifically, the analyst referenced management commentary given at a recent conference, suggesting there is "a material opportunity to right size the cost structure across the organization over the coming years." Raymond James emphasized the scale of UnitedHealth and the number of acquisitions that have been integrated into the company, saying these factors combine to create a larger-than-peer opportunity to realize cost savings through AI-driven integration and efficiency.
The firm noted that UnitedHealth shares, based on Raymond James's 2027 EPS estimate, trade at roughly 12.7 times that figure. That multiple represents a notable discount versus the stock's historical multiple around 20 times.
Valuation and modeling highlights:
- 2027 EPS estimate: $21.33.
- 2028 EPS estimate: $25.64.
- Modeled G&A improvement: 20 basis points per year in 2027 and 2028, ~ $1 billion annual savings versus prior flat-G&A assumption.
- Optum Health EBIT: $2.2 billion in 2026 rising to $3.1 billion in 2028.
- Every 100 basis points of G&A margin improvement is valued at about $3.80 per share in the firm's framework.
Raymond James's upgrade reflects an expectation that announced and potential AI programs can materially lower G&A as a share of revenue, while operational moves within Optum Health can lift risk margins and fee-for-service margins. The firm explicitly tied management's public comments at a conference to a credible path for cost-structure optimization over multiple years.
Investors should note that the firm's new target and estimates rest on several modeled assumptions about cost savings, network adjustments and risk revenue performance. The broker-dealer flagged those levers as the basis for outsized earnings potential versus current Street consensus.