A Fresh Vote of Wall Street Confidence Has UnitedHealth Stock Rising—And Leading the Dow Higher

UnitedHealth Group's stock is rallying Thursday, leading the Dow Jones Industrial Average higher on a mixed day for the major indexes after a fresh vote of confidence on Wall Street.

UnitedHealth (UNH) shares were up over 5% in recent trading to $396 after Bank of America analysts upgraded their rating of the insurer to a "buy," and lifted their price target to $450 from $420, citing expectations of improving margins as a result of more favorable medical cost trends.1

The analysts said "incoming data points make it more difficult to believe that the strong Q1 was purely a function of weak flu and storms,” which could mean more upside ahead for the insurer.

The upgrade from Bank of America could help improve sentiment around UnitedHealth's stock and extend its recent rally.

While higher-than-expected medical costs have weighed on UnitedHealth's results in recent quarters, the analysts said recent data points suggest improvement in cost trends, along with insurance usage, which could leave a more "favorable" setup for UnitedHealth's second-quarter results.

The stock has rallied in recent weeks following a solid first-quarter earnings report, recovering from a slump earlier in the year. Elevated medical costs, investigations into UnitedHealth's billing practices, and a sudden CEO change pressured the stock for much of last year, dragging it to multi-year lows.

With Thursday's gains, UnitedHealth shares are up about 20% since the start of the year, and more than 50% from its lows in late March.