For all the dog-cussing that Obamacare gets, you won’t hear much of it in the accounting departments of most major insurers, and that is doubly true for UnitedHealth Group Inc. (NYSE:UNH).
Throughtout the implementation phase of the Affordable Care Act over the past year, UNH, one of the nation’s leading healthcare insurers, is up more than 55%.
That’s a healthy move for major insurance company liked UnitedHealth Group. Especially impressive is the fact that UNH did this in one of the most tumultuous times for healthcare providers and insurers.
Before we get to the why UNH’s macro picture is so bright, let’s look at the numbers it posted last week for Q1:
- Revenue grew 13% year-over-year
- The UnitedHealthcare division added 1 million new subscribers in the quarter
- Q1 earnings from operations were up 33% year over year
- Margins increased almost 20% year over year
And to top it all off, UNH has raised its guidance for the rest of the year. UnitedHealth Group now expects to do $143 billion in revenue for 2015, $2 billion more than previously projected.
Those are some very impressive numbers, particularly for an insurance company of UnitedHealth Group’s size. UNH isn’t selling iPhones or computer chips or social media platforms.
And that’s the thing that makes UnitedHealth Group’s growth so compelling;UNH represents something that is long term and enduring. You don’t change healthcare providers like you change smartphones.
The more subscribers you have, the more you will likely keep. Now, it’s unlikely UNH will add 1 million more subscribers per quarter; much of that was likely the deadline for signing up for Obamacare coverage in January.
However, expanding margins during this growth surge is notable. Growing quickly and making more money while you’re expanding isn’t always what you see with companies. Usually, you sacrifice one for the other.
UNH is certainly firing on all cylinders at this point and will continue its trend for years to come, given demographic shifts that will see baby boomers hitting Medicare age by the tens of millions.
Plus, UNH continues to expand as witnessed by its recent acquisition of healthcare benefits manager Catamaran Corp (USA) (NASDAQ:CTRX) for $12.8 billion.
This deal signifies the trend toward insurers looking for ways to manage the cost of prescription medicines, since how much insurers pay out for drugs directly affects their bottom lines.
It’s rare when you find healthcare insurers on the side of the patient, but this is one case where intervention is happily welcomed. It’s a win-win. Policyholders get cheaper medications, and insurers increase their margins.
That kind of situation means that UNH stock is a great idea for the long term.
Louis Navellier is a renowned growth investor. He is the editor of five investing newsletters: Blue Chip Growth, Emerging Growth, Ultimate Growth, Family Trust and Platinum Growth. His most popular service, Blue Chip Growth, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.
