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United Health to Get a Profit Boost By Leaving Obamacare

Stock (Symbol)

United Health (UNH)

Stock Price

$144

Sector
Healthcare
Data is as of
August 4, 2016
Expected to Report
Oct 16
Company Description
unitedhealth_logoUnitedHealth Group Incorporated is a health and well-being company. The Company’s business platforms include UnitedHealthcare and Optum. UnitedHealthcare provides health care benefits to various customers and markets. Optum is a health services business serving the health care marketplace, including payers, care providers, employers, Governments, life sciences companies and consumers. The Company’s business platforms have four segments: UnitedHealthcare, OptumHealth, OptumInsight and OptumRx. OptumHealth is a health and wellness business serving the physical, emotional and financial needs of individuals. OptumInsight provides technology, operational and consulting services to participants in the health care industry. OptumRx is a pharmacy benefit manager. Purchased Catamaran 3/30/15. Source: Thomson Financial
Sharek’s Take
David SharekUnitedHealth (UNH) is leaving Obamacare, which is costing the nation’s largest health insurer around 4% of profits, or $0.35 a share in 2016 profits. This news isn’t new, but could be a reason why the stock is hot. Another reason for UNH’s strong performance this year is Optum, its health benefits services company, is taking business from competition such as Caremark. In the past Optum typically won deals which were either ties to United Health healthcare insurance coverage or government ones. Now Optum is shaking up the health services industry, but it still accounts for only around 15% of company profits. UNH is expected to grow profits 23% this year and has a reasonable P/E of 18. The stock is very safe with clean annual reports. Analysts has a 15% estimated annual long-term growth rate on the stock, and management also pays a 2% yield in addition to making acquisitions. With profits set to grow at least 14% during the next 4 qtrs, I believe this stock can continue its upward trend. This is a fine selection for both conservative investors and growth investors as well.
One Year Chart
UNH_2016_Q3Last qtr UNH had sales growth of 28% (mainly from the Catamaran PBM acquisition last year) as profits increased 13%, beating the 9% estimate. Annual profit estimates ticked up a bit as well. Profit Estimates for the next 4 qtrs are 18%, 48% (high due to a bad qtr a year ago when UNH missed estimates), 14% and 14%.
Fair Value
UNH_2016_Q3_PHWith all the positives this stock has going for it, I gave UNH a Fair Value P/E of 20, which equates to a $158 stock. I just wish I would have loaded up on the stock in 2010 when profits hit a new high as the P/E was around 8.
Bottom Line
UNH_2016_Q3_10yrUnited Health has a lot of momentum right now, especially with it leaving Obamacare. UNH is a safe stock with clean financials, a nice dividend and a solid Est. LTG. This stock works for a diverse set of investors and mutual funds will likely keep UNH as a top holding with Clinton ahead in the race for the Presidency. UNH ranks 3rd in the Conservative Growth Portfolio Power Rankings and 8th in both the Growth Portfolio and Aggressive Growth Portfolio Power Rankings.
Power Rankings
Growth Stock Portfolio

8 of 38

Aggressive Growth Portfolio

8 of 16

Conservative Stock Portfolio

3 of 37

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