UnitedHealth (UNH) Delivers Healthy Results to Keep Momentum Going

Stock (Symbol)

UnitedHealth (UNH)

Stock Price

$536

Sector

Data is as of

Expected to Report

Company Description

UnitedHealth Group Incorporated is a diversified health care company that operates Optum and UnitedHealthcare platforms.

The Company’s segments include Optum Health, Optum Insight, Optum Rx and UnitedHealthcare.

Optum Health provides health and wellness care, addressing the physical, emotional and health-related financial needs.

Optum Health, through its national health care delivery platform, engages people in care settings, including clinical sites, in-home and virtual.

Optum Insight serves the needs of health systems, such as physicians and hospital systems, health plans, state governments and life sciences companies.

Optum Rx provides a range of pharmacy care services through retail pharmacies, specialty and community health pharmacies and provides in-home and community-based infusion services.

UnitedHealthcare segment includes UnitedHealthcare Employer & Individual, UnitedHealthcare Medicare & Retirement, UnitedHealthcare Community & State and UnitedHealthcare Global. Source: Refinitiv

Sharek’s Take

UnitedHealth, the nation’s leading health insurer, is comprised of two main divisions, UnitedHealthcare and Optum. Between the two divisions, UnitedHealthcare is the larger of the two, but Optum is going to be a catalyst for this company in the coming years as organizations take preventative measures to keep employees healthy. UnitedHealthcare, which is responsible for the provision of health insurance, is the larger division, while Optum aims to take preventive measures to improve a people’s health.

Here’s more on UNH operating segments:

• UnitedHealthcare provides health care benefits, serving individuals and employers, and Medicare and Medicaid beneficiaries.
  • UnitedHealthcare revenue grew 13% last qtr, reflected by growth in number of people served.
  • Year-to-date, the number of people UnitedHealthcare serves has grown by 1.1 million driven by growth in the commercial and public sector businesses.
  • The commercial business gained 700,000 people year-to-date.
  • The senior and community-based business gained 400,00 people in 2023.
  • Selling season indicators are favorable, particularly for national accounts.
  • Management stated the typical Medicare Advantage senior spends $2000 a year less out of pocket compared to traditional Medicare. And more than 30 million Americans — half of all seniors — have Medicare Advantage (source: 2023 Q1 Earnings Call).
• Optum is a health services business using market-leading information, data analytics, technology and clinical insights to help improve overall health system performance, reduce healthcare costs and improve the consumer experience. Last qtr, Optum revenue increased 22%. Here are the segments of Optum business:
  • • OptumHealth, is a health and wellness business for the physical, emotional, and financial needs of people. Optum Health revenue per customer served increased 29%, driven by growth in the number of patients served under value-based arrangements and expansion of healthcare delivery services.
      
    • Optum Insight provides technology, operational, and consulting services to participants in the healthcare industry. Patients can use Change software to schedule appointments, complete forms, and pay for care on their phone, pad, or computer. Change is a major player in healthcare billing. Optum Insight’s sales grew 35%, driven by the addition of Change Healthcare and growth in the company’s technology-enabled offerings.
  • • OptumRx, a pharmacy benefit manager with relationships with Walgreens and CVS makes picking up prescriptions easy. OptumRX generates up to $37,000 in annual cost savings per patient by employing care at lower-cost sites. Optum Rx’s sales grew 14% due to new clients, expanded relationships with existing clients, and improvements in the pharmacy services offered. The latest selling season is on track to be the company’s strongest. Scripts grew 7% to 383 million versus 359 million last year.

UnitedHealth is a quality conservative stock, with a double-digit growth rate, a dividend, and a stock buyback program. Analysts give the stock an Est. LTG of 13% per year, and the dividend yield is over 1%, thus the total estimated annual return is 14% per year (hypothetically). Management has a long-term 13% to 16% earnings growth objective. In 2022, management returned $13 billion to shareholders via share repurchases and dividends. UNH is part of the Conservative Growth Portfolio.

One Year Chart

The Est. LTG is 13%, same as last quarter. Notice profits also grew 13% last qtr.

The P/E is 19, down from 20 last quarter. Note, since we are now in the company’s Fiscal Q4, I’m using 2024 profit estimates to calculate the P/E ratio in this chart.

Earnings Table

Revenue growth was attributed to the growth in the number of people served by UnitedHealthcare and Optum, as well as the company’s expanding scope of services. Care activity trends are led by outpatient care for seniors, particularly in the orthopedic and cardiac procedure categories.

Annual Profit Estimates are up for 2023 and 2024. Management also expects the medical care ratio to fall towards around 82.6%, plus/minus 50 basis points.

Qtrly Profit Estimates look good with 13%, 9%, 11%, and 10% profit growth expected the next 4 qtrs. Analysts think revenue will grow 11% next quarter.

Fair Value

Bottom Line

UnitedHealth (UNH) is one of the world’s safest stocks. This ten-year chart is almost perfect.

UNH was dealing with higher medical expenses as people were catching up on surgeries. Now that era seems to have passed and profit growth could return to a mid-teens rate next quarter driven by a higher number of customers served and broadening of services offered.

UNH ranks 12th in the Conservative Growth Portfolio Power Rankings.

Power Rankings

N/A

Aggressive Growth Portfolio

N/A

Conservative Stock Portfolio

12 of 31