UnitedHealth: A Powerhouse Health-Care Buy

Advertisement

Yesterday, management at UnitedHealth Group (NYSE:UNH) revealed stellar operating performance. In particular, its Optum segment, which focuses on population health management and care delivery, grew sales by 23%! OptumHealth now serves nearly one in five Americans. The company also served an additional 170,000 people in Q4, helping to boost the company’s top and bottom lines.

Total Q4 sales rose 8%, and net earnings advanced 22%, or $1.17 a share. The Street forecast earnings of $1.03 per share, so UnitedHealth Group yielded a 14% earnings surprise!

Looking forward, the company reiterated that it does have some challenges in the quarters ahead due to rising medical costs — its largest expense. The company forecast 5% to 6% sales growth and predicted that 2012 net earnings would likely be even with 2011’s, if not a little lower.

Investors are still trying to figure out how to digest the full-year guidance, so the stock is trading a little lower in today’s trading.

I think investors will soon realize the good news and underlying strength in UNH’s business and move the stock higher.

For starters, we’re only three weeks into the New Year, so UnitedHealth is prudently being conservative with its guidance. The fact remains that its Optum business is booming, and as consumer confidence and spending continues to pick up, we’ll start to see greater health-care use. I’m still very bullish about UNH and consider this a solidly positive earnings announcement.

Why? Under my ratings criteria, UnitedHealth earns no fundamental grade lower than a “C” and has held an overall “A” rating (strong buy) for six out of the last nine months. So I would be a buyer of UNH here, not a seller.


Article printed from InvestorPlace Media, https://investorplace.com/2012/01/unitedhealth-group-health-care-powerhouse-to-buy-now-unh/.

©2024 InvestorPlace Media, LLC