Ramstad: UnitedHealth seen as ‘tariff safe haven’ by investors

No two market downturns are the same — as is evident in the surprising recent upward movement of UnitedHealth Group’s stock.

Five years ago, as the COVID-19 pandemic arrived in the U.S., shares in Eden Prairie-based UnitedHealth Group plummeted 36% from February to April 2020, then quickly recovered as portions of the economy reopened and hospitals managed the initial wave of victims.

Yet in the two weeks since President Donald Trump laid out his confused, misguided tariff policy that tanked investment markets, UnitedHealth shares are up 12%.

Investors see the company — the nation’s fourth-largest in overall revenue and Minnesota’s largest by far — and the overall health care sector as insulated from the global trade war.

Michael Ha, an analyst at investment bank Baird, on Tuesday dubbed UnitedHealth and one other health insurer as a “tariff safe haven.”

On Thursday, UnitedHealth becomes the first of the nation’s big insurers to report first-quarter results.

“We think investors have warmed to [managed care organizations],” analysts Lisa McGill and John Stansel of J.P. Morgan wrote last week. “With that said, we think MCOs need to report a clean quarter to validate investor confidence.”

Trump’s approach on trade is creating so much turmoil that leaders of most public companies will rightfully tell investors in quarterly result discussions that plans for 2025 are up in the air — and so is their ability to assure a return on investment. For instance, Delta Air Lines last week jettisoned its full-year financial guidance for investors.

On April 2, Trump lifted U.S. tariffs to record highs, imposing huge costs on companies that bring parts or finished goods into the country from elsewhere. Last Wednesday, he delayed many of the tariffs for three months while continuing to state conflicting goals for them.

In some moments, Trump emphasizes a desire to raise U.S. manufacturing levels, which would require holding tariffs in place for years. In others, he vows to use tariffs as a negotiating tool to force other countries to become more open to U.S. goods, which would require abandoning tariffs quickly.

So his ultimate motive is unclear. The resulting uncertainty makes executives skittish about hiring, capital spending and other investments. And even worse, consumer hesitancy is growing, raising the chances of recession.

The care, insurance and fitness sectors of health care are relatively isolated from the push and pull of trade. Medical equipment and some pharmaceutical companies, however, have global production chains that Trump wants concentrated in the United States.

Then comes UnitedHealth, a $533 billion market cap company whose stock is up 19% so far this year, putting it near the top of the S&P 500. And this month, the company’s stock performance leads all those in the benchmark index. Not far behind is Humana, one of its main rivals in health insurance.

Because insurance is geographically oriented, providers aren’t subject to the form of taxation that tariffs represent. UnitedHealth in 2023 reduced its exposure to international markets by selling a Brazilian health insurance company that it had owned for about a decade.

“The only concern could be in the near term if the US economy falls into recession and causes a mix shift in medical insurance members from employer to lower-margin Medicaid plans,” Julie Utterback, analyst at Morningstar, wrote last week in a note to investors about UnitedHealth.

Three months ago, investors in UnitedHealth focused on disruption potential after the Dec. 4 fatal shooting of Brian Thompson, who was CEO of the insurance unit, UnitedHealthcare. The gunman received sympathy on social media from people who are dismayed by the powerful role that insurers play in paying for health care.

Andrew Witty, CEO of parent company UnitedHealth Group, acknowledged then the trade-off of the U.S. health care system, noting it provides advanced care and is tailored to individual needs while also immensely complex and costly and often confusing for the patients.

A year ago, I wrote that UnitedHealth’s business model appeared overly stretched. The company at that time was dealing with a cyberattack on one of its business units that serves as a middleman in payments from insurers to doctors and clinics. Across the country, hospitals and clinics were reeling from a disruption in cash flow.

Since then, UnitedHealth has proved me wrong. It surpassed $400 billion in annual revenue last year, a level eclipsed only by Walmart, Amazon and Apple. And analysts think there’s still plenty of room for it to grow.

“Despite its large size, we believe [UnitedHealth] can deliver double-digit earnings growth while returning capital to shareholders over the next three to five years,” McGill and Stansel of J.P. Morgan wrote.