UnitedHealth (UNH) Up 33% in a Year: What's Aiding the Stock?

UnitedHealth Group Incorporated UNH has been benefiting from robust revenues, enhanced telehealth services and solid cash flows.

Shares of the health care provider have gained 32.9% in a year compared with the industry’s rally of 27.1%. The Zacks S&P 500 composite has risen 16.1% in the said time frame. With a market capitalization of $308.1 billion, the average volume of shares traded in the last three months was 2.7 million.

The company has an impressive earnings surprise history. It has beat estimates in each of the trailing four quarters, the average surprise being 15.22%.

The Zacks Consensus Estimate for 2020 earnings per share indicates year-over-year improvement of 10.8%. The company has an impressive Growth Score of A. This style score analyzes the growth prospects of a company.

Will the Bull Run Continue?

UnitedHealth Group remains well-poised to grow courtesy of its market-leading capabilities in data and health information, advanced technology, and clinical expertise. The company not only aims to provide improved health outcomes for patients but also intends to lower health care costs, which bodes well for the entire health care system across the United States that has been grappling with cost challenges.

Furthermore, the company’s cost-effective health plans, which seem to be in great demand amid employers these days, usually contribute significantly to the company’s revenues. UnitedHealth Group continues to benefit from not only new deals and renewed agreements with renowned health care systems but also expansion of service offerings, which are crucial amid the COVID-19 induced health woes.

Backed by strong telehealth services, the diversified health plans enable UnitedHealth Group to foray further into government-sponsored programs, including Medicare Advantage and Medicaid. The company’s 2021 Medicare Advantage plans were unveiled this month. Through these plans, the company is likely to undergo the largest Medicare Advantage footprint extension in five years. The plans intend to serve an additional 3.2 million people across nearly 300 counties.

Moreover, the company’s revenues, which have witnessed a 10-year CAGR of 9.9%, have been constantly benefiting from robust revenues generated by the company’s UnitedHealthcare and Optum segments. The momentum continued in the first nine months of 2020 as evident from the company’s third-quarter results reported last week. The company hiked 2020 earnings guidance to a range of $16.50 to $16.75 per share, higher than the earlier provided projection of $16.25 to $16.55, which instills investor confidence in the stock.

Notably, UnitedHealth Group has been focusing on enhancing its existing suite of telehealth services. The company boasts of a strong vision network, and also launched teledentistry services aimed at oral health improvements of members. The pandemic has further highlighted the importance of telehealth services, and the company is well poised to capitalize on the current scenario. Other stocks in the same space, namely Teladoc Health, Inc. TDOC, Humana Inc. HUM and Magellan Health, Inc. MGLN, have also developed telehealth services.

Additionally, the company’s balance sheet continues to impress and highlights that it has sufficient cash reserves to meet its debt obligations. Robust cash flows not only enable investment in business but also help the company to return value to shareholders. Also, UnitedHealth’s return on equity of 28.9% as of Sep 30, 2020, compares favorably with the 2019-end figure of 25.7%. This underlines the company’s tactical utilization of shareholders’ funds.

Hence, we believe that the Zacks Rank #3 (Hold) company’s strong fundamentals will sustain momentum in the long run. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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UnitedHealth Group Incorporated (UNH) : Free Stock Analysis Report
 
Humana Inc. (HUM) : Free Stock Analysis Report
 
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