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UnitedHealth Group (UNH) Gains 38% in a Year: More Room to Run?

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·5 min read
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Shares of UnitedHealth Group Incorporated UNH have gained 37.9% in a year, outperforming the industry’s rally of 33.6% and the Medical sector’s decline of 14.9%. The S&P 500 composite index has rallied 13.4% in the same time frame. With a market capitalization of $454.3 billion, the average volume of shares traded in the last three months was 3.3 million.

Strong revenue growth stemming from robust business contributions, membership increase, a rebounding Global business and a sound financial position continue to drive UnitedHealth Group’s performance. An upbeat 2022 guidance might act as a tailwind for the stock.

This Zacks Rank #3 (Hold) healthcare provider has a stellar record of beating earnings estimates in each of the trailing seven quarters.

Return on equity of UnitedHealth Group in the trailing 12 months was 25.1%, better than the industry average of 22.1%. This highlights its efficiency in utilizing shareholders’ funds.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

Can UNH Retain the Momentum?

Management’s bullish outlook for 2022 also makes UnitedHealth Group an investor favorite. Revenues are forecast between $317 billion and $320 billion, the mid-point of which indicates an upside of 10.7% from the 2021 reported figure. The Zacks Consensus Estimate of $319.2 billion for the same is pegged well within UNH’s guidance.

Adjusted net earnings per share are projected to be $21.10-$21.60 this year, the mid-point of which represents year-over-year growth of 12.3%. The consensus mark ($21.70) for the metric lies higher than management-provided range.

Meanwhile, the Zacks Consensus Estimate for 2023 earnings stands at $24.78, which suggests 14.2% growth from the year-ago reported figure on an 8.3% increase in revenues of $345.8 billion. The expected long-term earnings growth rate is pegged at 14.8%, better than the industry’s average of 14.6%.

Let’s delve into the other notable tailwinds of the stock. With a 10-year CAGR of nearly 11%, revenues of UNH have been gaining on the back of solid contributions from its two business platforms — Optum and UnitedHealthcare. The two units seamlessly resort to a wide array of measures for expanding the capabilities, care network and global presence of the healthcare provider. UnitedHealthcare boasts a robust care network built through partnerships with several well-established healthcare organizations and pursuit of substantial investments, which empowers the unit to provide discounted access to care throughout the United States. Meanwhile, the Optum business undertakes several acquisitions and integrates clinical expertise, technology and data to offer better health outcomes for people.

UnitedHealth Group has solid Medicare and Medicaid businesses in place, which enable the healthcare provider to devise cost-effective health plans and reach various parts of the nation. UNH remains optimistic about Medicaid revenue growth owing to anticipated changes in mix and pricing trends. Several contract wins, and renewed agreements continue to provide a boost to the membership growth of UNH. In February 2022, UnitedHealthcare received a contract from the District of Columbia for catering to the District Dual Choice program enrollees in the district. Some of the states that had chosen UNH to serve members last year include Ohio, Hawaii and Oklahoma. The number of people served through the UnitedHealthcare business rose 5% in 2021 from the 2020 figure.

It is worth mentioning that after a persistently dismal performance by the Global business of UNH in 2019 and 2020, the business finally started to show signs of a turnaround in 2021. Revenues and membership figures related to the business have grown 8% and 2%, respectively, on a year-over-year basis.

UNH has a sound cash balance and solid cash-generating abilities, which is reflective of its solid financial standing. The healthcare provider generated cash from operations worth $22.3 billion in 2021, which inched up 0.8% from the 2020 figure. Consequently, UnitedHealth Group can pursue several growth-related initiatives and prudently deploy capital. Since initiating quarterly dividend payments more than a decade ago, the healthcare provider has hiked dividends for 11 straight years.

UnitedHealth Group has a favorable VGM Score of A. VGM Score helps identify stocks with the most attractive value, the best growth and the most promising momentum.

Stocks to Consider

Some better-ranked stocks in the medical space are AmerisourceBergen Corporation ABC, Gamida Cell Ltd. GMDA and Quidel Corporation QDEL. While Quidel sports a Zacks Rank #1 (Strong Buy), AmerisourceBergen and Gamida Cell carry a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

AmerisourceBergen delivered a trailing four-quarter earnings surprise of 2.29%, on average. The Zacks Consensus Estimate for ABC’s 2022 earnings suggests an improvement of 16.5% from the year-ago reported figure, while the same for revenues suggests growth of 10.8%. The consensus mark for 2022 earnings has moved north by 1% in the past 60 days. AmerisourceBergen has a Value Score of A.

The bottom line of Gamida Cell outpaced earnings estimates in three of the last four quarters and missed once, the average surprise being 12.92%. The Zacks Consensus Estimate for GMDA’s 2022 earnings suggests an improvement of 23% from the year-ago reported figure . The consensus mark for Gamida Cell’s 2022 earnings has moved north by 13.3% in the past 30 days.

Quidel delivered a trailing four-quarter earnings surprise of 129.40%, on average. The Zacks Consensus Estimate for QDEL’s 2022 earnings has moved north by 105.1% in the past 30 days. Quidel has a Value Score of B.

AmerisourceBergen stock has gained 31.7% in a year. Meanwhile, shares of Gamida Cell and Quidel have lost 53.7% and 19.3%, respectively, in the same time frame.


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UnitedHealth Group Incorporated (UNH) : Free Stock Analysis Report

AmerisourceBergen Corporation (ABC) : Free Stock Analysis Report

Quidel Corporation (QDEL) : Free Stock Analysis Report

Gamida Cell Ltd. (GMDA) : Free Stock Analysis Report

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