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5 Reasons Why You Should Add UnitedHealth to Your Portfolio
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UnitedHealth Group Inc. (UNH - Free Report) looks all the more attractive now in an industry that is witnessing massive regulatory disruption from renewed repeal and replace efforts. Its business model which has lesser exposure to Obamacare exchanges and Medicaid (which are on gun point of repeal and replace) provides it a good defense against any changes that might be introduced.
The company is rather a big player in Medicare which has support from the Trump presidency. The market also has a huge growth potential from high demand from baby boomers for this plan.
The stock has been witnessing upward revisions over the last 90 days, indicating analysts’ optimism about its earnings growth potential. The Zacks Consensus Estimate for 2017 and 2018 moved north by 0.8% and 0.5%, respectively.
In fact, the company surpassed estimates in each of the last four quarters, with an average positive earnings surprise of 4.6%.
The stock presently carries a Zacks Rank #2 (Buy) with an impressive Growth Score of B. Back-tested results show that stocks with a Growth Score of A or B, when combined with a Zacks Rank #1 (Strong Buy) or 2, handily outperform others.
Shares of UnitedHealth have gained 39% in a year, slightly ahead of the industry’s growth of 38% as well as the S&P 500’s 15.1% returns.
Given the positive estimate revisions and a bullish Zacks Rank, we expect a decent upside for the stock in the near term.
Strong Fundamentals
Increase in Earnings Guidance: Encouraged by its strong earnings performance in the first half of 2017, the company raised its outlook for 2017 GAAP net earnings to a range of $9.20 to $9.35 per share (previous guidance $9.10 to $9.30) and adjusted net earnings to a range of $9.75 to $9.90 per share (previous guidance $9.65-$9.85). The company kept intact its guidance for cash flow from operation at $12 billion.
Consistent Top-Line Growth: UnitedHealth has witnessed continued growth in revenues for the past several years. The improvement continued through the first half of 2017. A number of profitable acquisitions along with consistent focus on new product initiatives, technology modernization and product and business diversification have added to its top-line growth. The company’s recent guidance also points toward top-line growth, cementing our confidence in the stock.
Bottom Line Growing at Double Digits: Similar to the top line, UnitedHealth’s earnings per share have also been growing for the past several years. This has been achieved on the back of its premium growth, expense management, disciplined underwriting and share buybacks. A strong guidance for 2017 is being viewed favorably by investors.
Financial Strength: The company has a strong track of cash flow. It also remains committed to enhance shareholders’ value through share buybacks and dividend payouts. The company’s strong free cash flow has enabled it to deleverage its balance sheet.
Superior ROE: Further, UnitedHealth’s trailing 12-month return on equity (ROE) reinforces its growth potential. The company’s ROE of 21.5%, has increased in the past three years, and remains higher than the ROE of 20% for the industry, reflecting is tactical efficiency in using shareholders’ funds.
Other Stocks
Some other top-ranked players in the same space are Centene Corp. (CNC - Free Report) , Magellan Health, Inc. and WellCare Health Plans Inc. . Each of these stocks carries the same Zacks Rank as UnitedHealth. You can see the complete list of today’s Zacks #1 Rank stocks here.
Centene beat estimates in three of the last four quarters with an average positive surprise of 7.7%. Also, the Zacks Consensus Estimate for 2017 and 2018 moved up 2.5% and 2.1%, respectively, in the last 60 days.
Magellan Health beat estimates in three of the last four quarters with an average positive surprise of 23.9%. Also, the Zacks Consensus Estimate for 2018 has moved up 3.7% in the last 60 days.
WellCare Health Plans beat estimates in each of the last four quarters with an average positive surprise of 47.4%. Also, the Zacks Consensus Estimate for both 2017 and 2018 moved up 1.7% in the last 60 days.
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5 Reasons Why You Should Add UnitedHealth to Your Portfolio
UnitedHealth Group Inc. (UNH - Free Report) looks all the more attractive now in an industry that is witnessing massive regulatory disruption from renewed repeal and replace efforts. Its business model which has lesser exposure to Obamacare exchanges and Medicaid (which are on gun point of repeal and replace) provides it a good defense against any changes that might be introduced.
The company is rather a big player in Medicare which has support from the Trump presidency. The market also has a huge growth potential from high demand from baby boomers for this plan.
The stock has been witnessing upward revisions over the last 90 days, indicating analysts’ optimism about its earnings growth potential. The Zacks Consensus Estimate for 2017 and 2018 moved north by 0.8% and 0.5%, respectively.
In fact, the company surpassed estimates in each of the last four quarters, with an average positive earnings surprise of 4.6%.
The stock presently carries a Zacks Rank #2 (Buy) with an impressive Growth Score of B. Back-tested results show that stocks with a Growth Score of A or B, when combined with a Zacks Rank #1 (Strong Buy) or 2, handily outperform others.
Shares of UnitedHealth have gained 39% in a year, slightly ahead of the industry’s growth of 38% as well as the S&P 500’s 15.1% returns.
Given the positive estimate revisions and a bullish Zacks Rank, we expect a decent upside for the stock in the near term.
Strong Fundamentals
Increase in Earnings Guidance: Encouraged by its strong earnings performance in the first half of 2017, the company raised its outlook for 2017 GAAP net earnings to a range of $9.20 to $9.35 per share (previous guidance $9.10 to $9.30) and adjusted net earnings to a range of $9.75 to $9.90 per share (previous guidance $9.65-$9.85). The company kept intact its guidance for cash flow from operation at $12 billion.
Consistent Top-Line Growth: UnitedHealth has witnessed continued growth in revenues for the past several years. The improvement continued through the first half of 2017. A number of profitable acquisitions along with consistent focus on new product initiatives, technology modernization and product and business diversification have added to its top-line growth. The company’s recent guidance also points toward top-line growth, cementing our confidence in the stock.
Bottom Line Growing at Double Digits: Similar to the top line, UnitedHealth’s earnings per share have also been growing for the past several years. This has been achieved on the back of its premium growth, expense management, disciplined underwriting and share buybacks. A strong guidance for 2017 is being viewed favorably by investors.
Financial Strength: The company has a strong track of cash flow. It also remains committed to enhance shareholders’ value through share buybacks and dividend payouts. The company’s strong free cash flow has enabled it to deleverage its balance sheet.
Superior ROE: Further, UnitedHealth’s trailing 12-month return on equity (ROE) reinforces its growth potential. The company’s ROE of 21.5%, has increased in the past three years, and remains higher than the ROE of 20% for the industry, reflecting is tactical efficiency in using shareholders’ funds.
Other Stocks
Some other top-ranked players in the same space are Centene Corp. (CNC - Free Report) , Magellan Health, Inc. and WellCare Health Plans Inc. . Each of these stocks carries the same Zacks Rank as UnitedHealth. You can see the complete list of today’s Zacks #1 Rank stocks here.
Centene beat estimates in three of the last four quarters with an average positive surprise of 7.7%. Also, the Zacks Consensus Estimate for 2017 and 2018 moved up 2.5% and 2.1%, respectively, in the last 60 days.
Magellan Health beat estimates in three of the last four quarters with an average positive surprise of 23.9%. Also, the Zacks Consensus Estimate for 2018 has moved up 3.7% in the last 60 days.
WellCare Health Plans beat estimates in each of the last four quarters with an average positive surprise of 47.4%. Also, the Zacks Consensus Estimate for both 2017 and 2018 moved up 1.7% in the last 60 days.
5 Trades Could Profit "Big-League" from Trump Policies
If the stocks above spark your interest, wait until you look into companies primed to make substantial gains from Washington's changing course.
Today Zacks reveals 5 tickers that could benefit from new trends like streamlined drug approvals, tariffs, lower taxes, higher interest rates, and spending surges in defense and infrastructure.
See these buy recommendations now >>