Can anything stop UnitedHealth Group Inc (NYSE:UNH)? Shares of UNH stock are rising more than 1% in early trading action Tuesday after the nation’s largest health insurer not only reported first-quarter fiscal 2017 earnings results that topped Wall Street estimates on both the top and bottom lines, but also raised guidance for the rest of the year.
The Minnesota-based company, which returned almost 40% stock gains in 2016 despite the healthcare industry suffering its worst year since the Great Recession, had a lot to prove in 2017.
To that end, with a 15% year-over-year rise in profits, UNH got things off on the right foot. And the guidance boost suggests its sees no signs of slowing down.
An All-Around Healthy Quarter
For the full year that ends December, UnitedHealth expects adjusted 2017 earnings to be between $9.65 and $9.85 per share, compared to prior forecasts $9.30 to $9.60 per share issued last fall and well above consensus estimates of $9.50 per share.
Almost a month after the U.S. healthcare system was pulled by House Republicans, attempting to overhaul Obamacare, UNH is the first health insurer to report its results — Aetna Inc (NYSE:AET), Anthem Inc (NYSE:ANTM) and others don’t issue earnings for another couple weeks. And it wouldn’t have mattered to UnitedHealth had the Republicans succeeded in their drive to “repeal and replace.”
In the three months that ended March, UnitedHealth — which exited out of almost all of its Obamacare individual markets — earned $2.17 billion on $48.72 billion in total revenue. On an adjusted basis, when taking out one-time gains and costs, earnings came to $2.37 per share of UNH stock, or 20 cents above consensus estimates. Revenue topped forecasts by $40 million.
“Our focus on quality and consistency in everything we do for those we serve across the health system continues to strengthen our business each quarter,” said CEO Stephen Hemsley in a statement. “These efforts are driving consistent growth and strong bottom line performance across our businesses.”
In addition to Medicare and Medicaid, UnitedHealth sells employer-based insurance. The company also runs an Optum segment, providing pharmacy benefits management and technology services and also operates clinics and doctor’s offices. Optum earnings from operations improved by 16%, with each segment reporting double-digit percentage earnings growth.
UNH now serves 49.32 million health members, up from 47.67 million members in the year ago quarter.
Bottom Line for UNH Stock
UnitedHealth shares have traded down 1.5% over the past month, suggesting investors were being cautious ahead of Tuesday’s numbers. Still, the broader trend is well up, with shares improving by more than 30% in the past year as UNH has proven that it’s among the best-equipped insurers to handle whatever comes — more Obamacare, or something different.
Analysts give UNH stock a consensus buy rating and an average target of $185, suggesting 11% gains. I tend to agree, with maybe a little more optimism than even that.
UnitedHealth is right for investors who are looking for a blue-chip healthcare stock that is poised to outperform its peers in the next 12 to 18 months.
As of this writing, Richard Saintvilus did not hold a position in any of the aforementioned securities.