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UnitedHealth Group (UNH)

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UnitedHealth Group's (UNH) first quarter earnings came in significantly ahead of the Zacks Consensus Estimates on the back of strong revenue growth at UnitedHealthcare as well as Optum businesses and strong enrollment growth. We are bullish about the company's long-term growth prospects.

UnitedHealth has strengthened its key capabilities to respond to the emerging growth opportunities. These initiatives have been taken to expand its Medicaid and Medicare business, growing the health service business and expanding international operations. Though certain headwinds remain, we believe the company will beat the odds given its diversified business model with leading market share positions in the Commercial, Medicare, and Medicaid markets.

Our six-month target price of $70.00 equates to about 14.1x our earnings estimate for 2012. We view the $0.65 per common share annual dividend as secure, implying an expected return of about 20% over that period. This is consistent with our Outperform recommendation on the shares.

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