Guidance is now at least $19.50 of 2026 GAAP earnings. I model $22 next year. At 18.5 times that is $407, a market-like return from $378.
Key points
- $19.50 is the new 2026 GAAP EPS floor, up from July’s $18.45, $18.95 range.
- $22.00 is my 2027 GAAP EPS, using the company’s 13% growth floor on that run-rate.
- 18.5 times that 2027 number produces a $407 twelve-month target.
The call
The $378 price needs about $20.40 of 2027 earnings at 18.5 times. Management just lifted 2026 GAAP to at least $19.50 and called 13% the starting point for 2027, so the shares already assume a clean rebound.
I believe $22 of 2027 GAAP EPS is reachable as Medicare stays near the top of the 2, 4% margin band and Medicaid is no longer a 1% drag. I keep the multiple at 18.5 times because commercial trend is only stabilizing above the old 11% plan and Optum Health recovery is still a multi-year path.
GAAP EPS by year, with my 2026-27 estimatesCompany reports through 2025; 2026 floor from Oct 13 8-K; 2027 is my estimate.
Valuation
| Item | Figure |
|---|
| 2026 GAAP EPS floor | $19.50 |
| 2027 GAAP EPS (my estimate) | $22.00 |
| Shares outstanding | 898 million |
| Multiple on 2027 EPS | 18.5 times |
| 12-month target | $407 |
Eighteen and a half times matches the cash conversion the company still guides. A 12% miss on 2027 EPS at 16 times lands near $310; a commercial beat at 20 times is about $440. That band, not the quality of the franchise, is why the rating is hold.
Medical care ratio, last eight reported quartersQ3 2026 from Oct 13 release; earlier quarters from company filings. Lower is better.
Risks
- Commercial trend re-accelerates; watch Q4 MCR excluding reserve credits.
- Medicare Advantage 2027 enrollment falls more than the 935,000 year-to-date drop.
- RADV or IRS settlements exceed reserves; watch Note 7 in the next 10-Q.
What would change my mind
A 2027 outlook at or above $23 of GAAP EPS with commercial MCR back inside the original 11% trend would let me raise the multiple.