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UnitedHealth Beats on Q4 Earnings, Shares Slip: ETFs in Focus
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The largest U.S. health insurer UnitedHealth Group (UNH - Free Report) reported better-than-expected fourth-quarter 2023 results. Earnings and revenues breezed past the Zacks Consensus Estimate, but medical costs rose more than expected for the first time in two years. UNH shares fell 3.4% on the day.
Investors can tap the opportunity by investing in ETFs having the largest allocation to this health insurance giant. These include iShares U.S. Healthcare Providers ETF (IHF - Free Report) , Harbor Health Care ETF (MEDI - Free Report) , Health Care Select Sector SPDR Fund (XLV - Free Report) , iShares U.S. Healthcare ETF (IYH - Free Report) and Vanguard Health Care ETF (VHT - Free Report) .
Earnings in Focus
Earnings per share came in at $6.16, topping the Zacks Consensus Estimate of $5.98 and increasing 15.4% from the year-ago quarter. Revenues grew 14.1% year over year to $94.4 billion and were above the estimated $92 billion. The growth marks the company's eighth consecutive quarter of double-digit revenue increase. Solid results were again powered by double-digit growth in Optum and UnitedHealthcare.
Medical ratio (a measure of the percentage of premiums paid out for medical services) rose to 85% from 82.8% in the year-ago quarter as older Americans sought respiratory syncytial virus (RSV) vaccines and received additional medical services. With the increase of COVID-19 cases around the holidays, hospitalizations rose and spending on each patient also increased beyond typical rates. The company continues to expect the medical cost ratio to be in the range of 83.5-84.5% for 2024 (read: ETFs to Secure Your Portfolio Amid Potential Economic Fluctuations).
The UnitedHealthcare business served 52.8 million people as of Dec 31, 2023, which increased 2% year over year, driven by membership growth in its domestic commercial and Medicare Advantage businesses.
The health insurer affirmed its 2024 revenue guidance in the range of $400-$403 billion, suggesting 8% year-over-year growth at the mid-point. Earnings per share are expected in the range of $27.50-$28.00, indicating 10.5% year-over-year growth at the mid-point. Notably, UnitedHealth is among the largest players in the Medicare Advantage market, where private insurers offer an alternative to the original Medicare — the federal government's health insurance plan for people aged 65 and older or those with certain disabilities.
ETFs in Focus
Let’s delve into each ETF below:
iShares U.S. Healthcare Providers ETF (IHF - Free Report)
iShares U.S. Healthcare Providers ETF follows the Dow Jones U.S. Select Healthcare Providers Index with exposure to companies that provide health insurance, diagnostics and specialized treatment. The fund holds 69 securities in its basket. UNH occupies the top position with a 20.8% share.
iShares U.S. Healthcare Providers ETF has amassed $932.4 million in its asset base, while volume is light at about 18,000 shares per day, on average. It charges 40 bps in annual fees and has a Zacks ETF Rank #2 (Buy) with a Medium risk outlook.
Harbor Health Care ETF invests primarily in equity securities principally engaged in the research, development, production, or distribution of products and services related to the healthcare industry. It holds 35 stocks in its basket, with UNH taking the top position at 15.4% share.
Harbor Health Care ETF has accumulated $6.3 million in its asset base while trading in an average daily volume of 1,000 shares. It charges 80 bps in annual fees.
Health Care Select Sector SPDR Fund is the most popular healthcare ETF and follows the Health Care Select Sector Index. It holds 64 securities in its basket, with UnitedHealth taking the second spot at 9.5% of the assets. Pharma, healthcare providers & services and healthcare equipment & supplies take the largest share at 30.4%, 22% and 20.3% share, respectively, from a sector look (read: Healthcare ETFs Start 2024 on a Positive Note).
Health Care Select Sector SPDR Fund has AUM of $39.6 billion in its asset base and trades in a heavy volume of around 8 million shares. The expense ratio comes in at 0.10%. XLV has a Zacks ETF Rank #1 (Strong Buy) with a Medium risk outlook.
iShares U.S. Healthcare ETF offers exposure to 114 U.S. healthcare equipment and services, pharmaceuticals, and biotechnology companies by tracking the Russell 1000 Health Care RIC 22.5/45 Capped Gross Index. Here again, UnitedHealth is the second firm, accounting for 9% of the total assets. In terms of industrial exposure, pharma takes the top spot at 30.6%, followed by healthcare equipment (19.7%) and biotech (18.3%).
iShares U.S. Healthcare ETF has amassed $3.3 billion in its asset base, while charging 40 bps in annual fees. It trades in a moderate volume of around 55,000 shares a day and has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook.
Vanguard Health Care ETF tracks the MSCI US Investable Market Health Care 25/50 Index and holds 424 stocks in its basket. Of these, UnitedHealth takes the top spot with an 8.4% allocation. Pharma takes the largest share at 28%, while biotech and healthcare equipment round off the top three spots (see: all the Healthcare ETFs here).
Vanguard Health Care ETF is also one of the most popular and liquid ETFs, with AUM of $17.2 billion and an average daily volume of about 223,000 shares. It charges 10 bps in annual fees and has a Zacks ETF Rank #2 with a Medium risk outlook.
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UnitedHealth Beats on Q4 Earnings, Shares Slip: ETFs in Focus
The largest U.S. health insurer UnitedHealth Group (UNH - Free Report) reported better-than-expected fourth-quarter 2023 results. Earnings and revenues breezed past the Zacks Consensus Estimate, but medical costs rose more than expected for the first time in two years. UNH shares fell 3.4% on the day.
Investors can tap the opportunity by investing in ETFs having the largest allocation to this health insurance giant. These include iShares U.S. Healthcare Providers ETF (IHF - Free Report) , Harbor Health Care ETF (MEDI - Free Report) , Health Care Select Sector SPDR Fund (XLV - Free Report) , iShares U.S. Healthcare ETF (IYH - Free Report) and Vanguard Health Care ETF (VHT - Free Report) .
Earnings in Focus
Earnings per share came in at $6.16, topping the Zacks Consensus Estimate of $5.98 and increasing 15.4% from the year-ago quarter. Revenues grew 14.1% year over year to $94.4 billion and were above the estimated $92 billion. The growth marks the company's eighth consecutive quarter of double-digit revenue increase. Solid results were again powered by double-digit growth in Optum and UnitedHealthcare.
Medical ratio (a measure of the percentage of premiums paid out for medical services) rose to 85% from 82.8% in the year-ago quarter as older Americans sought respiratory syncytial virus (RSV) vaccines and received additional medical services. With the increase of COVID-19 cases around the holidays, hospitalizations rose and spending on each patient also increased beyond typical rates. The company continues to expect the medical cost ratio to be in the range of 83.5-84.5% for 2024 (read: ETFs to Secure Your Portfolio Amid Potential Economic Fluctuations).
The UnitedHealthcare business served 52.8 million people as of Dec 31, 2023, which increased 2% year over year, driven by membership growth in its domestic commercial and Medicare Advantage businesses.
The health insurer affirmed its 2024 revenue guidance in the range of $400-$403 billion, suggesting 8% year-over-year growth at the mid-point. Earnings per share are expected in the range of $27.50-$28.00, indicating 10.5% year-over-year growth at the mid-point. Notably, UnitedHealth is among the largest players in the Medicare Advantage market, where private insurers offer an alternative to the original Medicare — the federal government's health insurance plan for people aged 65 and older or those with certain disabilities.
ETFs in Focus
Let’s delve into each ETF below:
iShares U.S. Healthcare Providers ETF (IHF - Free Report)
iShares U.S. Healthcare Providers ETF follows the Dow Jones U.S. Select Healthcare Providers Index with exposure to companies that provide health insurance, diagnostics and specialized treatment. The fund holds 69 securities in its basket. UNH occupies the top position with a 20.8% share.
iShares U.S. Healthcare Providers ETF has amassed $932.4 million in its asset base, while volume is light at about 18,000 shares per day, on average. It charges 40 bps in annual fees and has a Zacks ETF Rank #2 (Buy) with a Medium risk outlook.
Harbor Health Care ETF (MEDI - Free Report)
Harbor Health Care ETF invests primarily in equity securities principally engaged in the research, development, production, or distribution of products and services related to the healthcare industry. It holds 35 stocks in its basket, with UNH taking the top position at 15.4% share.
Harbor Health Care ETF has accumulated $6.3 million in its asset base while trading in an average daily volume of 1,000 shares. It charges 80 bps in annual fees.
Health Care Select Sector SPDR Fund (XLV - Free Report)
Health Care Select Sector SPDR Fund is the most popular healthcare ETF and follows the Health Care Select Sector Index. It holds 64 securities in its basket, with UnitedHealth taking the second spot at 9.5% of the assets. Pharma, healthcare providers & services and healthcare equipment & supplies take the largest share at 30.4%, 22% and 20.3% share, respectively, from a sector look (read: Healthcare ETFs Start 2024 on a Positive Note).
Health Care Select Sector SPDR Fund has AUM of $39.6 billion in its asset base and trades in a heavy volume of around 8 million shares. The expense ratio comes in at 0.10%. XLV has a Zacks ETF Rank #1 (Strong Buy) with a Medium risk outlook.
iShares U.S. Healthcare ETF (IYH - Free Report)
iShares U.S. Healthcare ETF offers exposure to 114 U.S. healthcare equipment and services, pharmaceuticals, and biotechnology companies by tracking the Russell 1000 Health Care RIC 22.5/45 Capped Gross Index. Here again, UnitedHealth is the second firm, accounting for 9% of the total assets. In terms of industrial exposure, pharma takes the top spot at 30.6%, followed by healthcare equipment (19.7%) and biotech (18.3%).
iShares U.S. Healthcare ETF has amassed $3.3 billion in its asset base, while charging 40 bps in annual fees. It trades in a moderate volume of around 55,000 shares a day and has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook.
Vanguard Health Care ETF (VHT - Free Report)
Vanguard Health Care ETF tracks the MSCI US Investable Market Health Care 25/50 Index and holds 424 stocks in its basket. Of these, UnitedHealth takes the top spot with an 8.4% allocation. Pharma takes the largest share at 28%, while biotech and healthcare equipment round off the top three spots (see: all the Healthcare ETFs here).
Vanguard Health Care ETF is also one of the most popular and liquid ETFs, with AUM of $17.2 billion and an average daily volume of about 223,000 shares. It charges 10 bps in annual fees and has a Zacks ETF Rank #2 with a Medium risk outlook.