Shares of Health Insurer UnitedHealth Rise After Earnings Top Estimates

The Minnesota-based health insurer UnitedHealth reported better-than-expected earnings and revenue in the fourth quarter as the COVID-19 pandemic drove Optum’s growth, and more people enrolled for its government-sponsored plans, sending its shares up over 1.3% on Wednesday.

The largest insurance company by Net Premiums said it reported quarterly adjusted earnings of $4.48​​ per share, beating the Wall Street consensus estimates of $4.31 per share. The largest health insurance company by the membership for 2021 said its revenue jumped more than 12% to $73.74 billion from a year ago. That too beat the earnings estimate of $72.75 billion.

The UnitedHealth Group’s full-year 2021 revenues grew by $30.5 billion or 11.8% to $287.6 billion, with growth across Optum and UnitedHealthcare. Earnings from operations were $24.0 billion in 2021, with Optum businesses accounting for more than half of the total. Adjusted net earnings for the full year grew 13% to $19.02 per share.

Optum’s full-year revenues increased by $19.3 billion or 14.1% year over year while operating earnings increased by $1.9 billion or 19.4% to $12.0 billion. At year-end 2021, Optum Health will serve 100 million people, up from 98 million a year ago, the company added in the press release.

In total, UnitedHealthcare served 2.2 million more people in 2021, driven by continued strong growth in Medicare Advantage and Dual Special Needs Plans and expansion in the broader Medicaid market.

Following this, UnitedHealth stock rose over 1% in pre-market trading on Wednesday after closing 1.52% lower at $461.56 a day before. The stock slumped over 8% so far this year after surging more than 40% in 2021.

Executive Comments

“Our strong 2021 performance and confident growth outlook for 2022 and beyond reflect the accelerating innovation and expanding capabilities across Optum and UnitedHealthcare,” said Andrew Witty, chief executive officer of UnitedHealth Group.

Analyst Comments

UnitedHealth’s (UNH) 4Q21 EPS upside was driven by investment income and tax rate vs our model. 2021EPS landed 12-37c above guidance. MLR was in line with consensus but DCP declined (UNH cites timing factors). COGS was above our estimate. UNH reiterated its recent guidance for2022, including its Medicare Advantage outlook, and we’ll look for more commentary on that key line of business on the call today,” noted Gary Taylor, equity analyst at Cowen.

UnitedHealth Stock Price Forecast

Sixteen analysts who offered stock ratings for UnitedHealth in the last three months forecast the average price in 12 months of $518.13 with a high forecast of $575.00 and a low forecast of $440.00.

The average price target represents a 12.40% change from the last price of $460.99. From those 16 analysts, 13 rated “Buy”, three rated “Hold” while none rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $570 with a high of $850 under a bull scenario and $300 under the worst-case scenario. The investment bank gave an “Overweight” rating on the health care company’s stock.

UnitedHealth Group is the number one Medicare Advantage player with ~28% market share, the number two Medicare PDP player with ~20% market share, and the number two commercial player with ~15% market share. United’s model is enhanced via vertical integration with its OptumRx PBM platform, which is one of the three largest PBMs in the country,” noted Ricky Goldwasser, equity analyst at Morgan Stanley.

“With a large lead in breadth of services offerings and considerable exposure to government businesses, UnitedHealth is well-positioned for any potential changes in the US healthcare system. A strong balance sheet and continued solid cash generation give flexibility for continued M&A.”

Several other analysts have also updated their stock outlook. Oppenheimer raised the target price to $550 from $475. Bernstein lifted the target price to $564 from $508. Truist Securities upped the target price to $575 from $520.

Technical analysis also suggests it is good to buy as 100-day Moving Average and 100-200-day MACD Oscillator signals a strong buying opportunity.

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