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UnitedHealth (UNH) Ups Guidance: Here's What You Should Know

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  • UNH
  • MOH
  • ANTM
  • CNC

UnitedHealth Group Incorporated UNH recently provided updated financial guidance for 2021. It also provided upbeat estimates for 2022 financial performance. Its bullish outlook for 2022 business is good for the health insurance industry in general.

Top Line

UnitedHealth expects 2021 revenues to be around $287 billion, indicating an increase from the 2020 figure of $257.1 billion. The metric is expected to rise to the $317-$320 billion range in 2022. The Zacks Consensus Estimates for 2021 and 2022 revenues are pegged at $286.7 billion and $311.9 billion, respectively. This will be the first time the company is expected to cross the $300 billion revenues mark in a year. Its moves of combining the insurance unit with the provision of medical care business bode well.

Bottom Line

UNH expects its 2021 adjusted earnings per share to be $18.75-$18.90, marking an increase from the 2021 level of $16.88. The figure is likely to further rise to $21.10-$21.60 per share in 2022. The Zacks Consensus Estimates for 2021 and 2022 earnings per share are pegged at $18.85 and $21.69, respectively. Hence, its 2022 bottom-line estimates are below the consensus mark. This can be due to an uptick in insurance claims triggered by the coronavirus pandemic.

The overall increase in bottom line will likely be supported by lower operating costs. Operating cost ratio is expected to be around 14.8% in 2021, down from last year’s 16.2%. The metric might marginally decrease to 14.5% in 2022.

Earnings before interest, taxes, depreciation, and amortization or EBITDA for 2021 is expected at around $27 billion, up from last year’s $25.3 billion. UnitedHealth expects the metric to further increase within $29.9-$30.7 billion.

Shareholder Value

UnitedHealth is likely to keep boosting shareholder value through dividend payments and share repurchases. This year, it expects to pay $5.3 billion in dividends and buy back $5 billion worth of shares. Next year, dividend payments are likely to rise to around $5.5 billion. Share buybacks are likely to range within $5-$6 billion.

This Zacks Rank #3 (Hold) company is focused on increasing value for shareholders, backed by rising cash flows. Operating cash flows for 2021 is expected around $23 billion, marginally up from the 2020 level of $22.2 billion. For 2022, UnitedHealth expects operating cash flows within the range of $23-$24 billion.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Final Thoughts

Health care service providers, including UnitedHealth, Molina Healthcare, Inc. MOH, Anthem, Inc. ANTM and Centene Corporation CNC have witnessed growth in business this year as the overall economy is recovering fast. With the falling unemployment rate, the number of coverages being bought by employers for their workers are rising and expected to keep doing so. As such, the bullish outlook bodes well for these companies.

Molina Healthcare has been gaining from the restructuring and profitability improvement plan started back in 2017. The plan included streamlining of organizational structure to improve efficiency as well as the speed and quality of decision-making. Headquartered in Long Beach, CA, Molina Healthcare expects its full-year adjusted earnings guidance of not less than $13.25 per share. The company witnessed one upward estimate revision in the past 30 days against no movement in the opposite direction. In the past four reported quarters, MOH beat earnings estimates twice and missed on other two occasions, the average surprise being 4%.

Anthem’s top-line improvement remains impressive, witnessing a four-year CAGR of 9% (2015-2020). We expect the favorable top-line trend to continue, given its strong business growth, membership hike and significant new contracts in its government business. ANTM expects adjusted net income for the current year to be more than $25.85 per share, higher than the previous estimate of above $25.50. It has witnessed two upward estimate revisions in the past one-month period and no downward movement. Anthem beat earnings estimates thrice in the past four quarters and missed once, the average surprise being 4.7%.

Headquartered in St. Louis, MO, Centene anticipates revenues to be $125.2-$126.4 billion, up from the previous projection of $123.3-$125.3 billion. For 2021, the company’s adjusted earnings are expected to be within $5.05-$5.15 per share, compared with the past guidance of $5.05-$5.35. Centene's leading position in the industry is largely supported by its prudent operating performance, strong inorganic growth and solid fundamentals. It has witnessed five upward estimate revisions in the past 60 days compared with three movements in the opposite direction.

Price Performances

UnitedHealth shares jumped 30.2% in the past year outperforming the industry’s 28% rise.

Zacks Investment Research
Zacks Investment Research

Image Source: Zacks Investment Research

During this time period, stocks of Molina Healthcare, Anthem and Centene increased 37.7%, 29.5% and 13.6%, respectively.

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UnitedHealth Group Incorporated (UNH) : Free Stock Analysis Report

Molina Healthcare, Inc (MOH) : Free Stock Analysis Report

Centene Corporation (CNC) : Free Stock Analysis Report

Anthem, Inc. (ANTM) : Free Stock Analysis Report

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