By Martin Baccardax

UnitedHealth Group shares were sharply lower in premarket trading Wednesday following a downgrade from analysts at HSBC following the departure of the company's CEO earlier this month.

The stock fell 6.3% to $301.25. Entering Wednesday, the stock has fallen 36% this year.

HSBC analyst Sidarth Sahoo, who lowered his rating on UnitedHealth Group to Reduce from Hold in a note published Wednesday, warned the healthcare giant's recovery "could be delayed." Sahoo and his team also slashed their price target on UnitedHealth by 45%, taking it to $270 a share.

Earlier this month, UnitedHealth said Chief Executive Andrew Witty had stepped down from his role, citing "personal reasons," and would be replaced by current Chairman Stephen Hemsley, who ran UnitedHealth Group from 2006 to 2017.

The group also suspended its full-year profit outlook, noting adding pressure to its medical cost ratio, a key industry metric that gauges the difference between collected premiums and patient reimbursements. UnitedHealth also added that "the medical costs of many Medicare Advantage beneficiaries new to UnitedHealthcare remained higher than expected."

"The downside risk on 2025 estimated adjusted earnings per share has increased post guidance cancellation, giving the new CEO a kitchen sinking opportunity," Sahoo and his team wrote.

UnitedHealth's medical-cost ratio rose to 84.8% over the three months ended in March, the company reported in April. Overall premiums were up 11% to just under $78 billion in the first quarter, while medical costs rose 11.7% to $65.75 billion.

That prompted a reduction of $5 a share in UnitedHealth's full-year profit forecast, and triggered a 22% decline in the stock, wiping out more than $11 billion in market value.

The outlook was ultimately suspended when Witty stepped down, and Hemsley was appointed CEO, on May 13.

"UnitedHealth Group has tremendous opportunities to grow as we continue to help improve healthcare and to perform to our potential -- and, in so doing, return to our long-term growth objective of 13% to 16%," Hemsley said.

A separate report in the U.K.'s Guardian newspaper reported, citing data obtained through sources, public records, and court filings, said UnitedHealth paid nursing homes "thousands" in bonuses in order to keep patients from transferring to hospitals, where care costs would be far more expensive.

UnitedHealth called the accusation "verifiably false" in a statement to the newspaper.

The Wall Street Journal also reported earlier this month that the Justice Department was investigating the company for possible criminal Medicare fraud.

Write to Martin Baccardax at martin.baccardax@barrons.com

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May 21, 2025 07:57 ET (11:57 GMT)

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