News

UnitedHealth Group Incorporated UNH is currently aided by a growing customer base, contract wins, a well-performing Optum business and a solid financial position. An optimistic 2024 outlook also reinforces investors’ confidence in the stock.

Zacks Rank & Price Rally

UnitedHealth Group currently carries a Zacks Rank #3 (Hold).

The stock has gained 4.7% in the past year.

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Robust Growth Prospects

The Zacks Consensus Estimate for UnitedHealth Group’s 2024 earnings is pegged at $27.82 per share, which indicates an improvement of 10.8% from the year-ago reported figure. The consensus mark for revenues is $401 billion, implying 7.9% growth from the prior-year number.

The Zacks Consensus Estimate for 2025 earnings is pegged at $31.33 per share, suggesting 12.6% growth from the 2024 estimate. The consensus mark for revenues is $430.6 billion, which indicates a rise of 7.4% from the 2024 estimate.

Impressive Earnings Surprise History

UNH boasts an impressive surprise record. Its earnings outpaced estimates in each of the trailing four quarters, the average surprise being 2.67%.

Solid Return on Equity

Return on equity in the trailing 12 months is currently 26.4% for UnitedHealth Group, which is higher than the industry’s average of 23.3%. This substantiates the company’s efficiency in utilizing shareholders’ funds.

Solid 2024 Outlook

Management forecasts revenues to lie within $400 billion and $403 billion, the mid-point of which indicates an improvement of 8% from the 2023 reported figure.

Adjusted net earnings per share are anticipated between $27.50 and $28.00 in 2024. The mid-point of the outlook suggests 10.5% growth from the 2023 figure.

Business Tailwinds

UnitedHealth Group’s top line continues to gain on the back of solid contributions from its UnitedHealthcare and Optum businesses. Affordable Medicare and Medicaid plans devised through the UnitedHealthcare unit serve as a means to boost membership growth and premiums, the most significant contributor to a health insurer’s revenues. Premiums rose 13.1% year over year in 2023 while membership of the UnitedHealthcare business line advanced 2% year over year as of Dec 31, 2023.

To attract more customers, UNH integrates lucrative features within the plans from time to time. In February 2024, UnitedHealthcare launched the UnitedHealthcare Catalyst program in Owensboro, KY, in a bid to provide better health outcomes for people grappling with type 2 diabetes.

Further, an aging U.S. population is likely to sustain the solid demand for UnitedHealth Group’s Medicare plans in the days ahead. The beneficial features of the plans have also given several contract wins or renewed agreements to the health insurer from the federal or state authorities. Management expects to add 450,000-550,000 members within its Medicare Advantage business in 2024.

The Optum unit continues to benefit on the back of numerous buyouts and utilization of advanced technology, market-leading health analytics, modern care delivery as well as data-driven population health approaches. Revenues in the segment improved 24% year over year in 2023 while operating income increased 13.4% year over year. Optum Health, a part of the Optum business, estimates to cater to 750,000 additional patients in value-based arrangements in 2024.

UnitedHealth Group has been pursuing a merger and acquisition strategy, which has bolstered its capabilities and solidified its nationwide presence. The health insurer has resorted to significant investments in developing efficient telehealth services, which seem to be in dire need amid growing digitization being adopted across every sphere of life.

To pursue such uninterrupted business investments, a solid financial position is of vital importance. UNH’s financial strength is substantiated by a growing cash balance and solid cash-generating abilities. It generated operating cash flows of $29.1 billion in 2023, which advanced 10.9% year over year. A strong financial position encourages UNH to sustain its active capital deployment history through share buybacks and dividend payments. In June 2023, management approved a 14% increase in the quarterly dividend.

Stocks to Consider

Some better-ranked stocks in the Medical space are LeMaitre Vascular, Inc. LMAT, Edwards Lifesciences Corporation EW and DexCom, Inc. DXCM. While LeMaitre Vascular currently sports a Zacks Rank #1 (Strong Buy), Edwards Lifesciences and DexCom carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

LeMaitre Vascular’s earnings surpassed the Zacks Consensus Estimate in each of the last four quarters, the average beat being 8.91%. The Zacks Consensus Estimate for LMAT’s 2024 earnings suggests an improvement of 21.5%, while the consensus mark for revenues indicates growth of 9.4% from the respective year-ago figures.

The Zacks Consensus Estimate for LMAT’s 2024 earnings has moved 8.6% north in the past 30 days. Shares of LeMaitre Vascular have gained 34.8% in the past year.

Edwards Lifesciences’ earnings surpassed estimates in two of the last four quarters and matched the mark twice, the average surprise being 0.80%. The Zacks Consensus Estimate for EW’s 2024 earnings indicates a 10% rise, while the same for revenues suggests an improvement of 8.6% from the respective prior-year figures.

The consensus mark for EW’s 2024 earnings has moved 0.7% north in the past 60 days. Shares of Edwards Lifesciences have gained 17.5% in the past year.

DexCom’s earnings outpaced estimates in each of the trailing four quarters, the average surprise being 32.81%. The Zacks Consensus Estimate for DXCM’s 2024 earnings indicates a 15.8% rise, while the consensus mark for revenues suggests an improvement of 19.2% from the respective prior-year estimates.

The consensus mark for DXCM’s 2024 earnings has moved up 1.1% in the past 30 days. Shares of DexCom have gained 15.2% in the past year.

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