UnitedHealth Group Incorporated (UNH) provides a broad range of health benefit programs for individuals, companies, Medicare, and Medicaid beneficiaries and has direct relationships with over 1.5 million physicians and care professionals, as well as 7,000 hospitals and other care facilities nationwide.

The company’s shares have gained 30.4% over the past year and 18% over the past month to close its last trading session at $533.45. UNH beat estimates for both revenue and earnings per share in the last reported quarter.

Furthermore, the company updated its outlook for the full year 2022, anticipating adjusted earnings per share of $21.40 to $21.90, up from the previous guidance of $21.20 to $21.70. 

In addition, during the quarter, UNH repurchased $4 billion in stock, bringing total buybacks to $8 billion through the first half of 2022. In addition, the company increased its dividend by 14% for the June 28 payment date, extending its dividend growth streak to 13 years.

Here’s what could shape UNH’s performance in the near term:

Robust Financials

During the second quarter ended June 30, 2022, UNH’s total revenue increased 12.6% year-over-year to $80.33 billion. Its operating income increased 19.3% year-over-year to $7.13 billion. The company’s net income grew 18.8% from the year-ago value to $5.07 billion, while its EPS amounted to $5.34.

Strong Profitability

UNH’s trailing-12-month EBIT margin of 8.3% is 504.7% higher than the industry average of 1.4%. Also, its ROC, net income margin, and ROA of 25.1%, 5.9%, and 7.9% compare to its respective negative industry averages. Furthermore, its asset turnover ratio of 1.4% is 302.2% higher than the industry average of 0.35%.

Impressive Growth Prospects

Street expects UNH’s revenues and EPS to rise 11.6% year-over-year to $321.06 billion in fiscal 2022. In addition, UNH’s EPS is expected to rise at a 14.6% CAGR over the next five years. Moreover, the company has an impressive earnings surprise history, as it topped Street EPS estimates in all of the trailing four quarters.

Consensus Rating and Price Target Indicate Potential Upside

Of the 12 Wall Street analysts that rated UNH, ten rated it Buy, and two rated it Hold. The 12-month median price target of $581.67 indicates a 9.04% potential upside. The price targets range from a low of $513.00 to a high of $632.00.

POWR Ratings Reflect Solid Prospects

UNH has an overall grade of A, equating to a Strong Buy rating in our proprietary POWR Ratings system. The POWR Ratings are calculated considering 118 different factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight different categories. UNH has a B grade for Quality, Growth, and Stability. UNH’s strong profitability is consistent with the Quality grade. Its solid earnings and revenue growth potential justify the Growth grade. In addition, the stock beta of 0.77 is in sync with the Stability grade.

Of the 11 stocks in the A-rated Medical – Health Insurance industry, UNH is ranked #2.

Beyond what I stated above, we have graded UNH for Sentiment, Value, and Momentum. Get all UNH ratings here.

Bottom Line

The company reported impressive revenue and earnings growth in the last reported quarter. In addition, considering UNH’s higher profitability, attractive valuation, and sales and earnings growth potential, the stock is poised to witness solid gains in the near term. So, we believe the stock could be a great buy now.

How Does UnitedHealth Group Incorporated (UNH) Stack Up Against its Peers?

UNH has an overall POWR Rating of A, which equates to a Strong Buy rating. Check out these other stocks within the same industry with A (Strong Buy) ratings: Elevance Health (ELV), Centene Corp. (CNC), and Cigna Corp. (CI).

UNH shares were trading at $519.79 per share on Wednesday morning, down $13.66 (-2.56%). Year-to-date, UNH has gained 4.19%, versus a -16.71% rise in the benchmark S&P 500 index during the same period.

About the Author: Pragya Pandey

Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate. More...

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