We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Here's Why You Should Hold UnitedHealth Group (UNH) Stock Now
Read MoreHide Full Article
UnitedHealth Group Incorporated (UNH - Free Report) is supported by the improving performance of government business, owing to increasing premiums and numerous contract wins. The pursuit of buyouts, a solid financial position and a robust 2023 outlook are other tailwinds.
Optimistic Growth Projections
The Zacks Consensus Estimate for UnitedHealth Group’s 2023 earnings and revenues is pegged at $24.95 per share and $368.9 billion, respectively, indicating an improvement of 12.4% and 13.8% from the year-ago reported figures.
UNH boasts an impressive surprise record. Its earnings outpaced estimates in each of the trailing four quarters, the average being 2.7%.
Zacks Rank & Price Performance
UnitedHealth Group currently carries a Zacks Rank #3 (Hold). The stock has gained 16.1% in the past six months compared with the industry’s 14.8% rise.
Image Source: Zacks Investment Research
Return on Equity
UnitedHealth Group’s efficiency in utilizing shareholders’ funds can be substantiated by its trailing 12-month return on equity of 26.6%, which remains higher than the industry’s average of 23.4%.
Robust Outlook
UnitedHealth Group anticipates revenues between $357 billion and $360 billion, the mid-point of which indicates an improvement of 10.6% from the 2022 reported figure. It expects 2024 revenues between $400 billion and $403 billion.
Adjusted net earnings per share (EPS) are estimated to be between $24.85 and $25 for the year. The mid-point of the updated guidance suggests 12.3% growth from the 2022 figure. It expects adjusted net EPS in the range of $27.5-$28 in 2024.
Key Drivers
Revenues of UnitedHealth Group continue to benefit from solid contributions from its UnitedHealthcare and Optum businesses. Premiums contributed 78.3% to the company’s total revenues in the third quarter. It is expected to rise further as UnitedHealth Group continues to serve more people through Medicare and Medicaid Advantage plans.
Through the UnitedHealthcare unit, UNH devises effective Medicare and Medicaid businesses, as well as integrates lucrative features within them from time to time. The top line of the UnitedHealthcare segment is expected to benefit as the company grows its existing Medicaid markets and serves more people through fee-based and risk-based commercial offerings.
The company expects to add more than 1 million members to its Medicare Advantageplan this year, expanding its membership base and fetching higher premiums. The Medicaid business is set to grow as it continues to support states in initiating redeterminations. The company aims to reach 96% of all Medicare customers with its 2024 Individual Medicare Advantage Plan. UNH expects to add around 350,000-375,000 members to Medicare Advantage in 2024.
Optum Health segment will continue to gain from more people served under value-based care arrangements and consistent strengthening of care delivery services. UNH expects Optum Health to deliver double-digit revenue growth in 2024. It also aims to achieve an operating margin in the range of 8-10% in 2024. Optum Insight and Optum Rx are expected to benefit from enhanced capabilities and new sales and opportunities. However, excellent customer retention should also favor Optum Rx results. The company expects to serve nearly 900,000 additional patients in value-based care arrangements through the end of 2023. It aims to generate 1.5 billion scripts through OptumRx by 2023.
UnitedHealth Group has been pursuing collaborations with renowned healthcare providers to bolster its capabilities and solidify its nationwide presence. Its acquisition of Amedisys should enhance and expand its in-home capabilities and fuel growth in the Optum Health segment. Moreover, UNH will get access to Amedisys’s Medicare customers, thus enhancing its benefits business in the future. The company’s launch of Optum Rx Weight Engage is expected to drive innovation in its pharmacy services, leading to better retention and improved customer win figures.
The company also earns through investment income. The metric increased nearly 94.3% in the third quarter.A high-interest rate environment should boost this metric in the future.
A solid financial position is a dire need for companies that keep an eye on continued business investments. Apart from growth-related initiatives, a sound financial stand instills confidence in UNH in the tactical deployment of capital through share buybacks and dividend payments. The company returned $11.5 billion to shareholders in the first nine months of 2023 through share repurchases and dividends. Its dividend yield of 1.4% remains higher than the industry’s figure of 1.3%. UNH expects operating cash flow in the range of $27-$28 billion and $30-$31 billion for 2023 and 2024, respectively.
UNH currently carries an impressive Value Score of B.
Key Risks
The health insurer has been experiencing an increase in operating expenses due to higher medical and operating costs and the cost of goods sold. Such expenses continue to weigh on the margin expansion. We expect total operating costs to rise 13.3% in 2023. Nevertheless, we believe that a systematic and strategic plan of action will drive growth in the long term.
The Zacks Consensus Estimate for Atai Life Sciences’ current-year earnings implies a 68.4% improvement from the year-ago reported figure. It has witnessed four upward estimate revisions over the past 60 days against no movement in the opposite direction. ATAI beat earnings estimates in two of the last four quarters, met once and missed on one occasion.
The Zacks Consensus Estimate for Biodesix’s 2023 earnings indicates a 52.9% year-over-year increase. It has witnessed two upward estimate revisions over the past 60 days against no movement in the opposite direction. The consensus mark for BDSX’s 2023 revenues indicates 31.3% growth from a year ago. BDSX beat earnings estimates in three of the last four quarters and missed on one occasion.
The Zacks Consensus Estimate for Cencora’s fiscal 2024 bottom line is pegged at $12.88 per share, which rose 0.5% in the past 60 days. During this time, COR has witnessed five upward estimate revisions against none in the opposite direction. It beat earnings estimates in all the last four quarters, with the average surprise being 3.9%.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Here's Why You Should Hold UnitedHealth Group (UNH) Stock Now
UnitedHealth Group Incorporated (UNH - Free Report) is supported by the improving performance of government business, owing to increasing premiums and numerous contract wins. The pursuit of buyouts, a solid financial position and a robust 2023 outlook are other tailwinds.
Optimistic Growth Projections
The Zacks Consensus Estimate for UnitedHealth Group’s 2023 earnings and revenues is pegged at $24.95 per share and $368.9 billion, respectively, indicating an improvement of 12.4% and 13.8% from the year-ago reported figures.
UNH boasts an impressive surprise record. Its earnings outpaced estimates in each of the trailing four quarters, the average being 2.7%.
Zacks Rank & Price Performance
UnitedHealth Group currently carries a Zacks Rank #3 (Hold). The stock has gained 16.1% in the past six months compared with the industry’s 14.8% rise.
Image Source: Zacks Investment Research
Return on Equity
UnitedHealth Group’s efficiency in utilizing shareholders’ funds can be substantiated by its trailing 12-month return on equity of 26.6%, which remains higher than the industry’s average of 23.4%.
Robust Outlook
UnitedHealth Group anticipates revenues between $357 billion and $360 billion, the mid-point of which indicates an improvement of 10.6% from the 2022 reported figure. It expects 2024 revenues between $400 billion and $403 billion.
Adjusted net earnings per share (EPS) are estimated to be between $24.85 and $25 for the year. The mid-point of the updated guidance suggests 12.3% growth from the 2022 figure. It expects adjusted net EPS in the range of $27.5-$28 in 2024.
Key Drivers
Revenues of UnitedHealth Group continue to benefit from solid contributions from its UnitedHealthcare and Optum businesses. Premiums contributed 78.3% to the company’s total revenues in the third quarter. It is expected to rise further as UnitedHealth Group continues to serve more people through Medicare and Medicaid Advantage plans.
Through the UnitedHealthcare unit, UNH devises effective Medicare and Medicaid businesses, as well as integrates lucrative features within them from time to time. The top line of the UnitedHealthcare segment is expected to benefit as the company grows its existing Medicaid markets and serves more people through fee-based and risk-based commercial offerings.
The company expects to add more than 1 million members to its Medicare Advantageplan this year, expanding its membership base and fetching higher premiums. The Medicaid business is set to grow as it continues to support states in initiating redeterminations. The company aims to reach 96% of all Medicare customers with its 2024 Individual Medicare Advantage Plan. UNH expects to add around 350,000-375,000 members to Medicare Advantage in 2024.
Optum Health segment will continue to gain from more people served under value-based care arrangements and consistent strengthening of care delivery services. UNH expects Optum Health to deliver double-digit revenue growth in 2024. It also aims to achieve an operating margin in the range of 8-10% in 2024. Optum Insight and Optum Rx are expected to benefit from enhanced capabilities and new sales and opportunities. However, excellent customer retention should also favor Optum Rx results. The company expects to serve nearly 900,000 additional patients in value-based care arrangements through the end of 2023. It aims to generate 1.5 billion scripts through OptumRx by 2023.
UnitedHealth Group has been pursuing collaborations with renowned healthcare providers to bolster its capabilities and solidify its nationwide presence. Its acquisition of Amedisys should enhance and expand its in-home capabilities and fuel growth in the Optum Health segment. Moreover, UNH will get access to Amedisys’s Medicare customers, thus enhancing its benefits business in the future. The company’s launch of Optum Rx Weight Engage is expected to drive innovation in its pharmacy services, leading to better retention and improved customer win figures.
The company also earns through investment income. The metric increased nearly 94.3% in the third quarter.A high-interest rate environment should boost this metric in the future.
A solid financial position is a dire need for companies that keep an eye on continued business investments. Apart from growth-related initiatives, a sound financial stand instills confidence in UNH in the tactical deployment of capital through share buybacks and dividend payments. The company returned $11.5 billion to shareholders in the first nine months of 2023 through share repurchases and dividends. Its dividend yield of 1.4% remains higher than the industry’s figure of 1.3%. UNH expects operating cash flow in the range of $27-$28 billion and $30-$31 billion for 2023 and 2024, respectively.
UNH currently carries an impressive Value Score of B.
Key Risks
The health insurer has been experiencing an increase in operating expenses due to higher medical and operating costs and the cost of goods sold. Such expenses continue to weigh on the margin expansion. We expect total operating costs to rise 13.3% in 2023. Nevertheless, we believe that a systematic and strategic plan of action will drive growth in the long term.
Stocks to Consider
Some better-ranked stocks in the broader Medical space are Atai Life Sciences N.V. (ATAI - Free Report) , Biodesix, Inc. (BDSX - Free Report) and Cencora, Inc. (COR - Free Report) . Each stock presently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Atai Life Sciences’ current-year earnings implies a 68.4% improvement from the year-ago reported figure. It has witnessed four upward estimate revisions over the past 60 days against no movement in the opposite direction. ATAI beat earnings estimates in two of the last four quarters, met once and missed on one occasion.
The Zacks Consensus Estimate for Biodesix’s 2023 earnings indicates a 52.9% year-over-year increase. It has witnessed two upward estimate revisions over the past 60 days against no movement in the opposite direction. The consensus mark for BDSX’s 2023 revenues indicates 31.3% growth from a year ago. BDSX beat earnings estimates in three of the last four quarters and missed on one occasion.
The Zacks Consensus Estimate for Cencora’s fiscal 2024 bottom line is pegged at $12.88 per share, which rose 0.5% in the past 60 days. During this time, COR has witnessed five upward estimate revisions against none in the opposite direction. It beat earnings estimates in all the last four quarters, with the average surprise being 3.9%.