UnitedHealth stock

UnitedHealth Q2 Profits Double Amid COVID-19 Slowdown; Buy With Target Price $384

UnitedHealth Group Inc, an American for-profit managed health care company based in Minnesota, reported that its second-quarter profits doubled to $6.64 billion from $3.29 billion a year earlier as COVID-19 pandemic halted less urgent surgeries.

The world’s largest healthcare company by revenue anticipates these results will be offset in the quarters ahead by the assistance measures already taken, the resumption of deferred care and future COVID-19 cost and economic impacts.

The Company maintained its full-year earnings per share outlook for 2020 of net earnings of $15.45 to $15.75 share and adjusted net earnings of $16.25 to $16.55 a share. The second-quarter medical care ratio was impacted by the temporary deferral of care due to the pandemic, declining to 70.2% from 83.1% last year. The company reported earnings per share of $7.12.

At the time of writing, UnitedHealth shares gained 0.5% to 310 before Wednesday’s open.

Executive comment

“Our 325,000 dedicated team members, including the 120,000 clinicians serving on the front lines of care, have tirelessly responded to COVID-19 with agility, innovation and compassion,” David S. Wichmann, chief executive officer of UnitedHealth Group said in a press release.

“We moved swiftly to assist the people we serve and their care providers, including the provision of $3.5 billion in proactive voluntary customer assistance and accelerated care provider funding. We remain committed to taking further actions to address any future imbalances as a result of the pandemic.”

UnitedHealth stock forecast

Fourteen analysts forecast the average price in 12 months at $337.07 with a high forecast of $384.00 and a low forecast of $293.00. The average price target represents a 9.25% increase from the last price of $308.52. From those 14, 13 analysts rated ‘Buy’, one rated ‘Hold’ and none rated ‘Sell’, according to Tipranks.

Morgan Stanley target price is $371 with a high of $449 under a bull scenario and $183 under the worst-case scenario. Jefferies raised the target price to $295 from $283 and SVB Leerink initiates with outperform, $360 target price.

We second Morgan Stanley and SVB Leerink on UnitedHealth stock outlook. We also think it is good to buy at the current level as 50-day Moving Average and 100-200-day MACD Oscillator signals a strong buying opportunity.

Analyst view

“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,” said 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,” she added.