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Here's Why You Should Retain UnitedHealth Group (UNH) Stock

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UnitedHealth Group Incorporated (UNH - Free Report) stands well-poised for growth on the back of robust top-line growth, strong presence amid Medicare and Medicaid markets, and a solid financial position. An upbeat 2021 EPS guidance reinstates the growth prospects for the stock.

Zacks Rank & Price Performance

Presently, UnitedHealth Group carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The stock has gained 31.7% over a year compared with the industry’s rally of 23.2%. However, the Zacks Medical sector has lost 2.8% in the said time frame.

Zacks Investment Research
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Style Score

The company is well-poised for progress as evident from its impressive VGM Score of A. Here V stands for Value, G for Growth and M for Momentum, with the score being a weighted combination of all three factors.

It has an impressive Growth Score of A, which reinstates the growth prospects of a company.

Impressive Earnings Surprise History

UnitedHealth Group boasts an impressive earnings surprise record. It has surpassed earnings estimates in each of the trailing four quarters, the average surprise being 12.49%.

Positive Estimate Revision

The Zacks Consensus Estimate for 2021 earnings has been revised upward by 0.9% in the past 30 days.

Robust EPS Guidance for 2021

Following second-quarter 2021 results, the healthcare provider revised its 2021 business outlook for adjusted earnings per share. The metric is anticipated between $18.30 and $18.80, higher than the previous guidance of $18.10-$18.60. The mid-point of the revised guidance indicates 9.9% growth from 2020-end reported figure. The same is pegged lower than the Zacks Consensus Estimate of $18.76 per share.

Of the medical sector players that reported second-quarter 2021 results, Tenet Healthcare Corporation (THC - Free Report) , Universal Health Services, Inc. (UHS - Free Report) and Molina Healthcare, Inc. (MOH - Free Report) have raised their earnings guidance for 2021.

Business Tailwinds

The top line of UnitedHealth Group has witnessed a 10-year CAGR of 10.6%. The trend sustained in the first half of 2021 as well on the back of strong contributions from its UnitedHealthcare and Optum businesses. Both the units, which share the common endeavor of offering enhanced health outcomes at affordable costs, have been undertaking acquisitions and collaborations, and utilizing advanced technologies to attain the same.

Besides, the company continues to roll out diversified health plans through which it keeps on foraying into government-sponsored programs encompassing Medicare Advantage and Medicaid. A well-diversified portfolio and strong national foothold helped in winning in several new deals and renewing agreements for UnitedHealth Group, which in turn, has been contributing to its top-line growth.

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 value-based care particularly for individuals grappling with limited income. The year 2021 is expected to be a robust one for the company’s Medicare business during which it anticipates to add more than 900,000 people in individual and Group Medicare Advantage and Dual Special Needs plans.

The liquidity position of the healthcare provider appears strong with sound cash balance. Its ability to generate positive cash flows bodes well. The company’s leverage ratio has been improving. UnitedHealth Group has been tactical in utilizing its shareholders’ funds, evident from its ROE of 22.2%, which is higher than the industry’s figure of 19.4%.

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