UnitedHealth Group Incorporated (UNH), based in Minnetonka, Minnesota, is a major player in organized health systems. With a market capitalization of $545 billion, this company is vital in offering products and resources that help employers manage employee benefit programs worldwide.
Market Performance: A Mixed Bag for UnitedHealth
Shares of UnitedHealth have struggled over the past year, lagging behind the broader market. UNH stock has increased by 10%, while the S&P 500 Index ($SPX) has enjoyed a remarkable gain of nearly 30.4%. Year-to-date, UNH’s stock has risen 12.5%, yet it still trails the SPX’s impressive 23.1% growth.
Comparison with Healthcare ETFs Shows Resilience
A closer examination reveals that UNH has outperformed the iShares U.S. Healthcare Providers ETF (IHF), which has only climbed about 3.9% in the same period. Furthermore, UNH’s double-digit growth on a year-to-date basis contrasts sharply with the ETF’s slight losses during this time.
Challenges Ahead: Rising Costs and Investor Concerns
Despite some positive aspects, UNH faces significant pressures, including rising medical costs stemming from the pandemic’s aftereffects. Additionally, aggressive billing practices, expenses from cyberattacks, and decreased Medicaid coverage have contributed to concerns among investors. This complex backdrop has led to earnings revisions and a cautious outlook.
Third Quarter Results: A Silver Lining
On October 15, UNH reported its Q3 results, causing shares to drop over 8%. However, its adjusted earnings per share (EPS) of $7.15 outperformed Wall Street’s estimate of $7.02. The company also reported revenue of $100.8 billion, exceeding expectations of $99.5 billion. For the year, UNH anticipates adjusted EPS between $27.50 and $27.75.
Future Outlook: Analyst Confidence Remains Strong
For the current fiscal year, which ends in December, analysts project UNH’s EPS to grow by 9.9% to $27.60 on a diluted basis. Impressively, UNH has exceeded consensus estimates in each of the last four quarters, highlighting its resilience.
Among the 24 analysts covering UNH, the consensus rating is a “Strong Buy,” with 22 analysts recommending “Strong Buy” and two suggesting “Moderate Buy.” This sentiment reflects a more robust outlook compared to two months ago when only 21 analysts rated it a “Strong Buy.”
Price Targets Indicate Potential Growth
On November 3, Wells Fargo & Company (WFC) analyst Steve Baxter reiterated a “Buy” rating for UNH with a price target set at $630, suggesting a potential upside of 6.4% from current levels. The average price target across analysts stands at $625.79, implying a 5.7% premium. Notably, the highest projected price target of $715 highlights a potential upside of 20.7%.
On the date of publication, Neha Panjwani did not hold (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article are for informational purposes only. For more information, please view the Barchart Disclosure Policy here.
The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
