Raymond James reiterates a Strong Buy rating on UnitedHealth Group Inc (NYSE: UNH) while raising the price target to $635 from $620 as a U.S. judge gave a green signal for Change Healthcare Inc's (NASDAQ: CHNG) acquisition.
The ruling ended a 21-month fight between UnitedHealth and regulators.
The analyst John Ransom writes that the deal is expected to close within ten days of the judge's decision, but DOJ is "evaluating next steps," and there is a slight chance of an appeal and further delay.
For modeling purposes, the analyst assumes the deal closes October 1.
Adding in the CHNG deal, Raymond James is increasing the 2022 EPS estimate by $0.11 to $21.96 and the 2023 EPS estimate by $0.67 to $25.62.
Raymond James says the deal marks the second largest acquisition in UNH's history and adds to a record M&A year with ~$18.5 billion of acquisitions to date plus the $6 billion LHC Group Inc (NASDAQ: LHCG) and $1.5 billion EMIS Group Plc deals pending approval.
The analyst writes that CHNG adds a unique combination of payor-facing analytics assets to UNH's arsenal. It estimates that CHNG is $0.67, or 2.7% accretive, assuming they finance $3 billion of the purchase at a 4% interest rate.
Price Action: UNH shares are up 1.32% at $518.85 on the last check Thursday.
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