UNH with Nobias technology: Can United Healthcare Stock Overcome The Omicron Variant?
United Healthcare (UNH), which is a leader in the managed care and insurance industry, has become known for its top notch performance within the broader healthcare space. During the last decade, UNH shares have posted capital gains of 782.28% (drastically outperforming the S&P 500, which was up 232.96% during this same period of time). Not only is UNH known for strong share price appreciation, but reliable shareholder returns as well. UNH currently offers investors a dividend yield of 1.26%, boasts a 12-year annual dividend growth streak, and 5 and 10-year dividend growth rates of 18.7% and 24.8%, respectively.
During 2011, UNH paid shareholders $0.61/share in dividends. In 2021, UNH paid shareholders $5.60/share in dividends. In other words, we’ve seen this company’s dividend increase by nearly 820% during the last decade alone, which is a very rare feat, indeed. And yet, because of recent Omicron concerns and the broader sell-off that we’ve seen in the major averages, UNH shares have sold off over the last month or so.
Currently, United Healthcare is trading at a 9.4% discount to its recent 52-week highs. Anyone who takes a look at UNH’s long-term stock chart will see a fairly consistent uptrend in share price and therefore, in light of this recent near-double digit weakness, we wanted to take a look at what the credible analysts that we track with the Nobias algorithm have had to say about UNH shares lately.
UNH Jan 2022
Komal Nadeem, a Nobias 5-star rated author, recently co-published a bullish report regarding near-term revenue growth expectations from “big managed care companies” like UNH. Nadeem noted that Wall Street analysts are actually bearish on many of the companies in this space in the short-term, saying, “Industry analysts expect a majority of the largest publicly traded U.S. health insurers to see fourth-quarter 2021 earnings decline sequentially”. However, he notes that several companies within the space are well situated to produce growth.
As we said in the introduction, United Healthcare already reported Q4 results. Nadeem highlighted them in his piece, pointing towards the company’s relative strength, compared to peers. He wrote, “UnitedHealth Group Inc., the largest managed care insurer in the U.S. based on total assets, reported results ahead of the rest of the industry. The company logged adjusted net EPS of $4.48 in the period, compared to $2.52 in the prior-year period, and saw revenues jump tp [sic] $73.7 billion from $65.5 billion a year earlier. Its medical care ratio for full year 2021 came in at 82.6%, up from 79.1% a year earlier. UnitedHealth said the medical ratio rose due to higher COVID-19 costs and the repeal of the health insurance tax.”
Mark Reilly, a Nobias 4-star rated author, also recently published an article which was centered on UNH’s recent quarterly results. He began by saying, “The Minnetonka-based company posted earnings of $4.07 billion, or $4.26 per share, up from $2.21 billion, or $2.30 per share in the same period a year ago. Excluding one-time impacts, adjusted earnings were $4.48 per share. Reuters reports that analysts had expected adjusted per-share earnings of $4.31.” Not only did UNH beat on the bottom-line, but the company beat Wall Street’s expectations on the top-line as well. That $73.7 billion revenue figure that Nadeem quoted as $880 million above the consensus estimate for UNH’s revenue stream coming into the quarterly results.
Regarding the company’s insurance operations, Reily highlighted data which pointed towards strong continued growth. He said, “The company saw double-digit revenue growth in both its core UnitedHealthcare insurance business — which added 2.2 million new members during 2021 — and its Optum health-services unit, which topped 100 million consumers for the first time and boosted its revenue per consumer by 33%.” And, looking forward, he pointed towards UNH’s recent guidance update, in which the company’s management team “is forecasting another double-digit year in 2022, reaffirming its forecast for revenue between $317 billion to $320 billion next year and adjusted earnings between $21.10 and $21.60 per share.”
Nicholas Ward is a Senior Investment Analyst at Wide Moat Research. He has spent the last 8 years writing about the stock market at various publications, including Seeking Alpha, The Street, Forbes Real Estate Investor, Sure Dividend, The Dividend Kings, iREIT, Safe High Yield, and The Intelligent Dividend Investor.
John Reese, a Nobias 5-star rated author, also recently published a bullish article on United Healthcare which focused on “Validea's Patient Investor model” - which is an investment strategy centered around the strategy employed by famous investor Warren Buffett - and an upgrade that UNH shares received because of their strong Q4 results.
Reese said, “This strategy seeks out firms with long-term, predictable profitability and low debt that trade at reasonable valuations.” He noted that United HealthCare recently received an upgrade using the Validea system, saying, “The rating according to our strategy based on Warren Buffett changed from 86% to 93% based on the firm’s underlying fundamentals and the stock’s valuation.” And, it appears that the Validea Patient Investor model isn’t the only algorithm which highlights bullish sentiment surrounding UNH shares.
Looking at the data collected by the Nobias algorithm, we see that 94% of the recent opinions expressed by credible authors (those with 4 and 5-star ratings) have been “Bullish”. Looking at the average price target assigned to UNH shares by the credible Wall Street analysts that we track (once again, only those with Nobias 4 or 5-star ratings) we see a $514.50 figure. Today, after its recent sell-off, UNH trades for $461.17. This share price represents upside potential of approximately 11.5%, relative to that Nobias credible analyst average price target of $514.50.
Disclosure: As of 1/22/2022, Nicholas Ward has no UNH position. Nicholas Ward wrote this article for Nobias at their request with a view of giving investors a balanced perspective based on the writings of Nobias highly rated analysts and bloggers. Nobias has no business relationship with any company whose stock is mentioned in this article and does not have a position in this stock.
Additional disclosure: All content is published and provided as an information source for investors capable of making their own investment decisions. None of the information offered should be construed to be advice or a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is suitable for any specific person. The information offered is impersonal and not tailored to the investment needs of any specific person.
Disclaimer: The Nobias star rating is based on past performance results and is not an indicator of future results. These past performance returns do not represent returns that any investor actually earned. Assumptions made include the ability to purchase the stocks recommended by the author under liquid markets where the transaction would be at the market price for the day. In reality, loss in liquidity may have a material impact on the returns that actually may have been earned. Further, returns are calculated without any including transaction costs, management fees, performance fees or expenses, or reinvestment of dividends and other income. This information is provided for illustrative purposes only.