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Ride on UnitedHealth's Solid Q4 Results With These ETFs

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The largest U.S. health insurer UnitedHealth Group (UNH - Free Report) reported robust fourth-quarter 2017 results. The company breezed past the Zacks Consensus Estimate on both the top and the bottom lines as well as raised its full-year outlook, sending shares of UNH to record highs.   

Earnings per share came in at $2.59, well above the Zacks Consensus Estimate of $2.50 and 22.7% higher than the year-ago earnings. Revenues rose 9.5% year over year to $52.06 billion, edging past the Zacks Consensus Estimate of $51.52 billion.

For 2018, the company raised its outlook to reflect the tax benefit resulting from the new tax legislation, which President Donald Trump signed into law on Dec 22. UnitedHealth now projects adjusted earnings per share in the range of $12.30-$12.60 compared with the previous forecast of $10.55-$10.85. The new guidance is well above the Zacks Consensus Estimate of $11.11. This suggests a solid outlook for the company’s growth (read: ETFs to Bet on the Final Tax Bill: What Hot, What's Not).

Further, the stock currently has a Zacks Rank #3 (Hold) and a solid industry Rank in the top 10%. It is a triple play stock with a frenzy of strong momentum, cheap price and robust growth, underscoring its potential to outperform in the weeks ahead.  

Given the strong fundamentals, investors should tap the opportunity with ETFs having the largest allocation to this health insurer giant. For them, we have presented four ETFs that could see potential upside in the days ahead.

iShares U.S. Healthcare Providers ETF (IHF - Free Report)

This ETF follows the Dow Jones U.S. Select Healthcare Providers Index with exposure to companies that provide health insurance, diagnostics and specialized treatment. In total, the fund holds 44 securities in its basket and UNH occupies the top position with 13.5% share. The fund has amassed $492.3 million in its asset base while volume is light at about 24,000 shares per day on average. It charges 44 bps in annual fees and has a Zacks ETF Rank #3 with a Medium risk outlook (read: 4 ETFs to Gain From CVS-Aetna Deal).

Health Care Select Sector SPDR Fund (XLV - Free Report)

The most popular healthcare ETF, XLV follows the Health Care Select Sector Index. This fund manages nearly $17.5 billion in its asset base and trades in heavy volume of around 6.6 million shares. Expense ratio comes in at 0.14%. In total, the fund holds 61 securities in its basket with UNH taking the second spot at 6.7% of the assets. Pharma accounts for 33% share from a sector look while healthcare providers and services, biotech, and healthcare equipment and supplies make up for a double-digit exposure each. It has a Zacks ETF Rank #3 with a Medium risk outlook.

iShares U.S. Healthcare ETF (IYH - Free Report)

This fund offers exposure to 118 securities by tracking the Dow Jones U.S. Health Care Index. Here again, UnitedHealth is the second firm accounting for 6.5% of total assets. In terms of industrial exposure, pharma takes the top spot at 32.9%, followed by biotech (22.7%), and healthcare equipment (19%). The product has amassed nearly $2 billion in its asset base while charges 44 bps in annual fees. It trades in a moderate volume of around 83,000 shares a day and has a Zacks ETF Rank #3 with a Medium risk outlook.

SPDR Dow Jones Industrial Average ETF DIA

This fund follows the Dow Jones Industrial Average, providing exposure to 30 blue-chip U.S. stocks. UNH occupies the fourth position in the basket with 6.13% share. The ETF is well spread out across a number of sectors with industrials, information technology, financials, consumer discretionary and health care taking the top five spots with a double-digit exposure each. DIA is one of the largest and most-popular ETFs in the space with AUM of $23.9 billion and average daily volume of around 2.8 million shares. It charges 17 bps in annual fees from investors and has a Zacks ETF Rank #2 (Buy) (read: (read: After a Solid Start, What Awaits Dow ETF in Q4 Earnings?).

Vanguard Health Care ETF (VHT - Free Report)

This ETF tracks the MSCI US Investable Market Health Care 25/50 Index and holds 372 stocks in its basket. Of these, UNH takes the third spot with 5.8% allocation. Pharma takes the largest share at 30.4% while biotech and healthcare equipment round off the top three spots. VHT is also one of the popular and liquid ETFs with AUM of $7.5 billion and average daily volume of about 186,000 shares. It charges 10 bps in annual fees and has a Zacks ETF Rank #3 with a Medium risk outlook.

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