Buy AES Immediately (From Chaikin Analytics)
Key Takeaways
- Trump's proposed rate increases sent UNH and other insurers into the buy zone.
- UNH continues to work on its turnaround, sustaining margin strength in Q4.
- The 2026 guidance is likely to be cautious, setting this stock up for outperformance as the year progresses.
The Trump administration sent ripples of fear through the insurance sector in late January, setting UnitedHealth Group (NYSE: UNH) and other insurance stocks up as buying opportunities. The sell-off was driven by a proposed update to Medicare reimbursements paid to private insurers. Investors reacted because the headline increase came in well below expectations, signaling tighter payment growth than the market had priced in.
Insurance stocks fell as a group following the announcement, with UnitedHealth Group among them. The company's stock price has now corrected by about 50% since mid-2025, amid CEO issues, a massive cyberattack, and regulatory and investor scrutiny.
The reimbursement proposal undoubtedly poses a risk to UNH and other insurers.
However, the 0.09% increase is a headline figure; the Centers for Medicare and Medicaid Services (CMS) noted that the actual reimbursement, on a per-client average, will be more than 2.5%, a figure that aligns with long-term growth forecasts.
Additionally, there is ample opportunity for the Trump administration to alter its proposal, for Congress to intervene, or for the CMS, which finalizes the plan, to go its own way before the new rates go into effect, beginning in 2027. (CMS rates historically diverge from Presidential recommendations due to the formulaic nature of Medicare and Medicaid payments).
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UnitedHealth’s Dividend Looks Secure as Buybacks Continue
UnitedHealth Group's stock is as cheap as it's going to get and, more importantly, capital returns continue to flow.
UnitedHealth Group’s dividend is safe and reliable; the biggest risk is that the pace of share buybacks will slow.
Even so, the company still expects to keep shrinking its share count in 2026 and 2027, extending the buyback-driven momentum after a 1.8% reduction in 2025.
The dividend also stands out as compelling, with the yield topping 2.5% while the stock trades near long-term lows.
The payout ratio is a manageable and sustainable 40%, leaving cash flow to support annual distribution increases.
The company is on track for inclusion in the Dividend Aristocrats club, likely to be achieved by the middle of the next decade.
UnitedHealth Group Delivers Margin Strength Amid Turnaround Efforts
UnitedHealth Group struggled in Q4 with lingering one-off expenses impairing the results. The company’s $113.21 billion in net revenue was up more than 12% year-over-year (YOY) but fell short of estimates by approximately 50 basis points. The 50-basis-point miss was almost negligible, given the margin strength, which came in well above MarketBeat’s reported consensus. Segmentally, UnitedHealthcare was strongest with a 17% YOY increase offset by a smaller 8% gain in Optum.
In terms of margin news, costs rose, and operational quality offset them. The net result was that the medical care ratio increased, while the operational ratio remained flat, leaving earnings in line with MarketBeat’s reported consensus, despite the top-line weakness. These results will be sufficient to sustain financial health and capital returns, and the guidance calls for additional margin improvement in the upcoming year.
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Analysts and Institutional Activity Align With UNH’s Bottom
The analysts and institutional activity aren’t robustly bullish but do align with UNH’s 2025/2026 bottom. The analysts, who had pressured the stock price with downward target revisions, shifted their stance late in 2025. The consensus rating never faltered, pegged at Moderate Buy, but a number of reiterated and increased price targets halted the sell-off, allowing a bottom in share price to form.
At the same time, institutions, which collectively own 85% of the stock, bought on balance throughout 2025, highlighting the deep value on offer. The opportunity in 2026 is that analysts and institutional sentiment will remain firm, supporting the stock and setting it up for a rebound that will likely form before the year’s end. 
UNH’s 10% January price plunge was triggered by Trump, which occurred the evening before the Q4 report was released. It took UNH stock back to a critical support level, aligning with the bottom in play. It is possible this stock will continue retreating, eventually retesting the 2025 lows, but a lower low is not anticipated. The likely scenario is that UNH will reconfirm support at or near the $300 level and continue rebuilding its support base.
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