UnitedHealth Added to Goldman Preferred List After Earnings Strength

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•  01 May 2026
 

$UNH UnitedHealth was added to Goldman Sachs’ preferred stocks list after reporting better-than-expected results and showing early signs of recovery. The investment bank frames the story as “shrink to grow,” with lower activity volume but higher profitability, signaling a shift toward earnings momentum rather than top-line expansion. Warren Buffett built a position in the stock over the past year before exiting, effectively making it one of his final endorsed ideas, and the shares have since gained about 40%. Goldman maintains the stock remains attractive, citing improving fundamentals and institutional flows beginning to re-engage.

The central focus is the Medicare Advantage segment, private insurance plans for seniors subsidized by the government, which accounts for about 40% of UnitedHealth’s revenue. Over the past year, the segment became a source of pressure due to rising medical costs and changes in government reimbursement mechanisms. In response, the company plans to reduce its Medicare Advantage membership by approximately 1.3 million this year and cut Optum Health membership, its healthcare services arm, by around 10%. These actions reflect a deliberate repositioning rather than demand deterioration.

At first glance, declining membership suggests revenue pressure, but Goldman views this as a structural reset toward multiple expansion. The company is exiting lower-margin business, repricing policies, reducing costs, and improving operational efficiency. Analyst Scott Fidel estimates Medicare Advantage revenue will decline about 4% this year, while operating profit in the segment is expected to rise roughly 50%, highlighting a widening gap between scale and profitability. Updated pricing is already reflected in the business, and healthcare cost trends are converging toward company assumptions.

Additional efficiency gains are expected from artificial intelligence integration across operations, claims management, and workflow optimization. Goldman projects this transformation can support average annual EPS growth of more than 15% through 2028, positioning the company in a multi-year recovery cycle. The narrative is not revenue acceleration but a return to disciplined capital allocation and higher-quality earnings streams, reinforcing institutional positioning as the earnings cycle inflects.

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