Investment banker Goldman Sachs recently raised its price target for UnitedHealth Group Incorporated (UNH) shares from $400 to $435, citing the company\u2019s increased full-year guidance, announced in its latest quarterly results release, as evidence of UnitedHealth\u2019s long-term earnings growth potential (as cited in Investing.com).<\/p>\n
Notably, Goldman Sachs expects UnitedHealth to return to at least 13% to 16% earnings per share growth over the next several years as it executes its business recovery.<\/p>\n
While this upgrade, following UNH\u2019s recently released better-than-expected first-quarter 2026 results, may tempt investors to add the stock to their portfolios immediately, a significant headwind remains on the horizon. Legislative changes enacted last year have led to major funding cuts in Medicaid for 2026, putting UNH\u2019s Medicaid business under intense margin pressure. In fact, the company\u2019s management has already signaled expectations for membership attrition and negative margins within this specific segment throughout the year.<\/p>\n
However, for those who want to gain exposure to UnitedHealth\u2019s growth while mitigating the idiosyncratic risks of its Medicaid business, diversified healthcare exchange-traded funds (ETFs) offer a more prudent path. By investing in funds where UNH is a top-10 holding, investors benefit from the company’s strong medical cost management and declining medical care ratio (which improved to 83.9% in the first quarter), while spreading risk across other healthcare giants in pharma, biotech and medtech industries.<\/p>\n
Before suggesting a few such ETFs for your portfolio, let\u2019s take a detailed look at UnitedHealth\u2019s first-quarter performance across key metrics and how analysts from different firms reacted to this result to get a hint of the whole picture.<\/p>\n
A Brief Analysis of UNH\u2019s Q1 Results <\/p>\n
UnitedHealth\u2019s first-quarter adjusted earnings per share (EPS) surpassed the Zacks Consensus Estimate by 11.9%, while its revenues beat the consensus mark by 2.1%. On a year-over-year basis, the company delivered a solid performance on both counts.<\/p>\n
Its first-quarter operating cost ratio came in at 13.8%, up year over year from 12.4%, reflecting the timing of targeted investments across operations, technology and care delivery as well as incremental investments in areas such as AI, customer experience, cybersecurity and community engagement.<\/p>\n
UNH was successful in bringing its debt-to-capital ratio down to 42.9% by the end of the first quarter and remains on track to end this year with its goal of achieving a 40% debt-to-capital ratio.<\/p>\n
Story Continues <\/p>\n
From the viewpoint of the share buyback program, the company initiated share repurchases earlier than anticipated and expects to deploy at least $2 billion by the end of the second quarter of 2026.<\/p>\n
As far as its Optum Rx business is concerned, UnitedHealth started 2026 by onboarding more than 800 new clients, while reducing contact call center volume 25% through enhanced digital and AI-enabled self-service, with member satisfaction reaching more than 95%.<\/p>\n
Within areas like consumer member experience, UNH recently launched Avery, a generative AI chatbot answering member questions for UnitedHealthcare. The company aims to expand this chatbot to include over 20 million members by the end of 2026.<\/p>\n
Meanwhile, Optum Real, an AI-first platform that UNH launched a couple of quarters ago, now has 0.5 billion transactions year to date, with the company expecting to close the year at over 2.5 billion transactions.<\/p>\n
Analysts\u2019 Reactions <\/p>\n
Following UNH\u2019s Q1 results, analysts from varied firms, apart from Goldman Sachs, have upgraded their price target for this stock, showing renewed optimism in its progress.<\/p>\n
For example, Morgan Stanley recently raised its price target on UNH from $375 to $395, while maintaining its \u201cOverweight\u201d rating. Other renowned institutions like Deutsche Bank raised its price target on UnitedHealth from $304 to $360, while maintaining a Hold rating, following the company\u2019s first-quarter results.<\/p>\n
UNH-Heavy ETFs to Watch <\/p>\n
iShares U.S. Healthcare Providers ETF IHF<\/p>\n
This fund, with net assets worth $738.8 million, provides exposure to 60 U.S. companies that provide health insurance, diagnostics and specialized treatment. Of these, UnitedHealth Group takes the first spot, accounting for a 26.50% share. CVS Health CVS (12.49%) and HCA Healthcare (7.38%) hold the second and third positions in this fund, respectively.<\/p>\n
IHF charges 38 basis points (bps) in fees. It traded at a good volume of 1.24 million shares in the last trading session.<\/p>\n
iShares U.S. Healthcare ETF IYH<\/p>\n
This fund, with net assets worth $2.84 billion, provides exposure to 103 U.S. healthcare equipment and services, pharmaceuticals, and biotechnology companies. Of these, UnitedHealth Group takes the fourth spot, accounting for a 5.99% share. Pharma giants Eli Lily LLY (13.12%), Johnson & Johnson JNJ (10.15%) and AbbVie ABBV (6.52%) hold the top three spots in this fund.<\/p>\n
IYH charges 38 bps in fees. It traded at a volume of 0.40 million shares in the last trading session.<\/p>\n
Vanguard Health Care ETF VHT<\/p>\n
With net assets of $16.2 billion, this fund provides exposure to 407 companies engaged in health care equipment manufacturing, health care services, and the research, development, and marketing of pharmaceuticals and biotechnology products. Of these, UnitedHealth Group takes the fifth spot, accounting for a 3.94% share. LLY (11.89%), JNJ (9.34%) and ABBV (6.18%) hold the top three spots in this fund.<\/p>\n
VHT charges 9 bps in fees. It traded at a volume of 0.28 million shares in the last trading session.\u00a0<\/p>\n
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report<\/a><\/p>\n Johnson & Johnson (JNJ) : Free Stock Analysis Report<\/a><\/p>\n Eli Lilly and Company (LLY) : Free Stock Analysis Report<\/a><\/p>\n CVS Health Corporation (CVS) : Free Stock Analysis Report<\/a><\/p>\n AbbVie Inc. (ABBV) : Free Stock Analysis Report<\/a><\/p>\n iShares U.S. Healthcare ETF (IYH): ETF Research Reports<\/a><\/p>\n Vanguard Health Care Index Fund ETF Shares (VHT): ETF Research Reports<\/a><\/p>\n iShares U.S. Healthcare Providers ETF (IHF): ETF Research Reports<\/a><\/p>\n This article originally published on Zacks Investment Research (zacks.com).<\/a><\/p>\n