UnitedHealth Shares Hit 52-Week High on Q2 Earnings Strength


Shares of UnitedHealth Group Inc. (UNH ) hit a 52-week high of $87.24 on Jul 17, 2014, The spike in the share price was backed by better-than-expected second-quarter earnings that the company had posted on the day, before the market opened. At the close of trading on Thursday, shares of the company had surged 15.1% on a year-to-date basis.

UnitedHealth reported earnings of $1.42 per share, handily beating the Zacks Consensus Estimate of $1.25. The company’s revenues improved 7% year over year to $32.6 billion. More importantly, the health insurer delivered a positive earnings surprise for the third consecutive quarter.

The results were primarily aided by higher revenues from the public sector and senior market, which got a boost from federal and state-based programs.

Investors’ optimism was also buoyed with the upward revision of the company’s full-year guidance. UnitedHealth now expects 2014 revenues of $130 billion, up from the previous forecast of $128 billion to $129 billion. The bottom line was also guided higher to $5.50 to $5.60 from $5.40 to $5.60 projected previously.

The company is consistently gaining from strong growth in Medicaid and Medicare business, and superior performance by its international operations. The company’s expanding business on public exchange markets and continued strong growth at Optum also drove the earnings.

Investors also favorably view UnitedHealth’s increased participation in the health insurance exchange, which will swell its membership. The company announced that it expects to participate in as many as 24 of the law's individual health insurance exchanges in 2015, up from only four this year.

The industry bellwether carrying a Zacks Rank # 3 (Hold), kicks off earnings every quarter. Its earnings beat thus signals a favorable operating trend across the industry. Following strong earnings from UnitedHealth, a positive sentiment was felt across the industry and shares of other health insurers such as WellPoint Inc. (WLP), Aetna Inc. (AET) and Cigna Corp. (CI) also witnessed a surge, with each stock hitting a 52-week high.

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