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UnitedHealth Gains on Strong 4Q Results, 2019 Looks Favorable

Zacks Equity Research

Shares of UnitedHealth Group Inc. UNH gained following strong fourth-quarter and full-year 2018 earnings, which beat estimates and grew year over year. A confident outlook for 2019 was another driving factor behind the rise in the stock.

The stock gained almost 3.6% on the day following strong fourth-quarter results.

In a year's time the stock has gained 11.8% compared with the industry's growth of 10%.


Management sounded confident about its business fundamentals in 2019, reflecting its ability to invest, innovate and grow and in the breadth of opportunities across health care.

The company maintained its tradition of beating its own guidance with fourth-quarter and full-year 2018 adjusted earnings per share coming in above the guidance provided at the company’s investor conference.

UnitedHealth’s full-year 2018 revenues exceeded $226 billion, growing 12% year over year, while adjusted earnings per share grew 28% to $12.88 per share.

Most impressive was the company’s earnings from its Optum segment, which is the health service part of the company. It provides revenues which are outside the purview of the numerous regulations that bind its health insurance business provided by the segment UnitedHealthcare. Most noteworthy, full-year 2018 Optum revenues surpassed $100 billion for the first time.

Its major segment, UnitedHealthcare grew to serve 2.4 million more people with revenues up 12% year over year to $183.5 billion. UnitedHealthcare earnings from operations were $9.1 billion, consistent with the outlook provided by the company in November.

The segment’s performance was weighed down slightly by pressures in a handful of Medicaid markets in the fourth quarter. However, actions executed on both structural costs and rate recovery, will ensure return to stronger margin levels for this business in 2019.

Strategic investments made over the past 20 years, with strong business wins and pipelines and the many platform expansion opportunities in the United States along with global expansion positions the company for strong growth in the coming years.

UnitedHealth, with a Zacks Rank #2 (Buy), has got this reporting cycle off to a flying start. While the other players in the health care space are lined up to report financial results, below are three stocks, poised to beat on earnings per the proven Zacks model. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

HCA Healthcare, Inc. HCA has an Earnings ESP of +2.09% and a Zacks Rank #1 (Strong Buy). The company is expected to report fourth-quarter earnings results on Jan 29.

Humana Inc. HUM has an Earnings ESP of +0.22% and a Zacks Rank #2. The company is expected to report fourth-quarter earnings results on Feb 6.

Tenet Healthcare Corp. THC has an Earnings ESP of +16.7% and a Zacks Rank #3. The company is expected to report fourth-quarter earnings results on Feb 25.

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