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UnitedHealth Hits 52-Week High on Solid Results, SCAI Deal

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On Feb 16, shares of UnitedHealth Group Inc. (UNH - Free Report) touched a 52-week high of $164.97, driven by robust fourth-quarter earnings, strong 2017 guidance and the announcement to acquire Surgical Care Affiliates, Inc. (“SCAI”).

Over the past one year the shares of the company have returned 39% compared ith a return of 31.01% logged by the Zacks categorized Health Maintenance Organization industry.

Investors seemed please with the guidance for 2017 which was announced earlier and reiterated during the earnings release. The guidance calls for adjusted earnings per share of $9.30-9.60, which translates into year-over-year growth of 17.4% (at the mid-point). Revenues are projected at $197–$199 billion, up 7.6% year over year.

The strength in earnings was backed by a 16% year-over-year increase in the UnitedHealthcare segment’s consolidated revenue of $37.9 billion. This was driven by double-digit growth in Employer & Individual, Community & State, and Medicare & Retirement wherein revenues came in at $13.5 billion (up 12%), $8.6 billion (up 17%) and $14.0 billion (up 16%), respectively. Also International/global business revenues were $1.76 billion (up 42% year over year).

Also, the company has been able to grow and diversify its revenues by expanding its Optum business, which is less regulated then the business of selling insurance under its UnitedHealthcare segment. This diversification by the company was also well received by investors as it will enable the company to stay ahead of the stiff competition in the health insurance business.

The SCAI acquisition will be made by OptumCare, a subsegment of Optum engaged primary and urgent care delivery services business. The company has targeted Surgical Care by virtue of its leadership in the outpatient surgery industry, serving approximately 1 million patients per year in more than 30 states. It will also expand OptumCare’s capabilities in outpatient surgical procedures.

Also the exit from the troubled public exchange business, which will shield the company from the losses, has cemented investors’ confidence in the stock.

UnitedHealth carries a Zacks Rank #3 (Hold). From the healthcare space, HCA Holdings Inc. (HCA - Free Report) also hit a 52-week high on the same day.

Some better-ranked stock from the same space include WellCare Health Plans, Inc. (WCG - Free Report) and  and Universal Health Services, Inc. (UHS - Free Report) , both carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

WellCare Health Plans delivered positive surprises in each of the last four quarters with an average surprise of 62.73%.

Universal Health, on the other hand, surpassed expectations in two of the last four quarters with an average beat of 0.28%.

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