UnitedHealth's Momentum Continues in Third Quarter; Raising Fair Value Estimate on Recent Cash Flows

UnitedHealth's strong results continued in the third quarter, and we are increasing our full-year expectations mildly, given recent trends. Considering that mild change and cash flows generated since our last valuation change in April, we are raising our fair value estimate by a mid-single-digit percentage. However, we continue to view UnitedHealth's shares as moderately overvalued relative to key peers, given the latter's similar profit growth prospects but lower trading multiples. Like its peers, UnitedHealth's economic moat rating remains narrow, which recognizes the long-term policy risks it faces primarily in medical insurance and pharmacy benefit management, although the shares appear to be benefiting from a particularly benign period of policy risk, currently.