UnitedHealth Group Incorporated UNH has been gaining momentum from its two business segments — UnitedHealthcare and Optum. Growing telehealth services and robust cash flows have also been aiding the stock.
The company boasts of an impressive earnings surprise history. It has surpassed estimates in each of the trailing four quarters, the average surprise being 15.22%.
As of Sep 30, 2020, UnitedHealth Group’s trailing 12-month return on equity (ROE) of 27.5% has not only improved for the past five years but remains higher than the industry’s figure of 24.5%. This highlights the company’s tactical utilization of shareholders’ funds. Also, the company has a Value Score of B, which reflects an attractive valuation of the stock.
What’s Driving the Stock?
UnitedHealth Group issued an updated outlook for this year in the beginning of this month, which bodes well for investors. Adjusted net earnings per share (EPS) are now expected to reach $16.75, which indicates an improvement of 10.9% from the 2019 reported figure. Revenues for this year are anticipated to be around $257 billion, thereby suggesting growth of 6.1% from the prior-year reported figure. It reiterated the long-term outlook for its EPS to be between 13-16% per annum, on average. Also, the Zacks Consensus Estimate for the company’s current-year earnings and revenues is expected to grow 11.1% and 6.1%, respectively.
Moreover, the healthcare provider has been benefiting from growing revenues, which have witnessed a 10-year CAGR of 9.9%. The top line has been driven by the company’s two business segments. While UnitedHealthcare has been offering a diversified range of health benefit programs for employers and individuals across the United States, Optum stretches itself beyond traditional pharmacy benefit management and strives to provide whole-person care for its members directly through local medical groups and ambulatory care systems. The two businesses, however, share the same goal of providing enhanced health outcomes at lower costs.
Through the diversified health plans, UnitedHealth Group has been delving constantly into government-sponsored programs, including Medicare Advantage and Medicaid. The company’s 2021 Medicare Advantage plans bears testament to the same in which it is likely to undergo the largest Medicare Advantage footprint extension in five years. While an aging U.S. population is likely to provide a boost to the company’s Medicare business, the Medicaid business is anticipated to keep growing as several states focus on providing managed care particularly for individuals grappling with complex care needs.
Furthermore, the healthcare provider has been making every effort to enhance existing suite of telehealth services, which has gained prominence amid the COVID-19 pandemic. Through these services, patients plagued with health woes could seek the advice of healthcare providers virtually without exposing themselves to the virus. The company not only boasts of a strong vision network but also has launched teledentistry services aimed at oral health improvements of members. Other stocks in the same space, namely Teladoc Health, Inc. TDOC, Humana Inc. HUM and Magellan Health, Inc. MGLN, have also developed telehealth services.
Additionally, the company is backed by strong balance sheet. Robust cash generating abilities not only enable the company to undertake acquisitions but also help it to return value to shareholders through buybacks and dividend payments. Cash flows from operations are anticipated between $20 billion and $21 billion in 2021.
Shares of this Zacks Rank #3 (Hold) company have gained 17.4% in a year compared with the industry’s rally of 7.1%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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UnitedHealth Group Incorporated (UNH): Free Stock Analysis Report
Humana Inc. (HUM): Free Stock Analysis Report
Magellan Health, Inc. (MGLN): Free Stock Analysis Report
Teladoc Health, Inc. (TDOC): Free Stock Analysis Report
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