UnitedHealth Group Incorporated’s (UNH - Free Report) health service business, branded as Optum, and private equity firm, Summit Partners, are together going to acquire a controlling interest in Tacoma-based Sound Physicians. Total value of this transaction is $2.2 billion.
With this deal, the company would be able to expand its OptumHealth portfolio as well as continue its focus on care delivery, which has been really successful over the past few quarters through provider acquisitions. OptumHealth’s care delivery services account for around two-thirds of the company’s projected revenues in 2018. Last year, the parent company also announced to buy DaVita Medical Group for $4.9 billion, which will add around 300 medical clinics across six states. It also purchased the Reliant Medical Group in April 2018 for a cash consideration of $28 million.
The Optum segment of UnitedHealth has consistently put in efforts to widen its capabilities. Management is considering company’s health service business expansion to account for 35-40% of operating income over the long term. To achieve this goal, the company is making aggressive acquisitions in the segment.
Meanwhile, Sound Physicians, a staffing company focused on hospital medicine, would be able to enhance its current service lines, expand into new geographies and cope with the highly competitive market by dint of this deal. Credit rating giant Moody’s too jumped into action by attributing B1 Corporate Family rating to Sound Physicians. The agency also mentioned that the assigned rating reflects OptumHealth's stake in the company.
Expanding portfolio through mergers and acquisitions is a current rage in the healthcare industry. It is a strategy followed by many industry players to boost their portfolio. Notably, Anthem, Inc. (ANTM - Free Report) has completed the acquisition of Aspire Health for improving the quality of healthcare and expanding its capabilities. Similarly, earlier this year, Humana Inc. (HUM - Free Report) along with private-equity partners, bought Kindred Healthcare (KND) to extend into patientcare.
Shares of UnitedHealth have surged 34.4% in a year’s time, outperforming its industry’s growth of 33.4%. The stock carries a Zacks Rank #2 (Buy).
Other Key Pick
Investors looking for another top-ranked stock in the same industry can also consider WellCare Health Plans, Inc. (WCG - Free Report) .
WellCare offers managed care services for government-sponsored health care programs. The stock sports a Zacks Rank #1 (Strong Buy) and managed to come up with an average four-quarter positive surprise of 53.89%. You can see the complete list of today’s Zacks #1 Rank stocks here.
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