Contemplate Purchasing, Selling, or Retaining UNH Shares When They Cost $500?
UnitedHealth Group's (NYSE: UNH) stock has taken a hit, dropping by 3% since the beginning of 2024. This underperformance is in stark contrast to the S&P 500's impressive 28% rise during the same period. The primary reason behind this lackluster performance is the escalating medical costs, which have negatively impacted the company's profitability. Over a slightly longer span, UNH stock has slipped from around $515 in early 2023 to its current level of $500.
Key elements that have influenced this trend include:
- A substantial leap in UnitedHealth's adjusted earnings, which soared from $22.19 in 2022 to its current $27.66.
- A substantial decline in the company's trailing P/E ratio, dropping from 23x in 2022 to the current 18x.
However, despite the drop in its stock price, UNH remains an intriguing option for investors seeking potential gains with reduced volatility. One such alternative is the High-Quality portfolio, which has outperformed the S&P 500, delivering returns exceeding a remarkable 91% since its inception.
Driving Forces Behind UnitedHealth's Earnings Growth
UnitedHealth's revenue growth has been mainly fueled by the expansion of its OptumHealth segment, which offers a variety of healthcare services through affiliated medical groups. OptumHealth's revenue skyrocketed by an impressive 48% between 2022 and 2024, outpacing the company's total revenue growth of 23%[4]. This impressive performance can be attributed to an increased number of patients under value-based care arrangements, including at-home services, and a significant boost in sales in both the Medicaid and Medicare segments during the same period[4].
Despite the impressive revenue growth, UnitedHealth's operating margin has slightly dipped, from 8.8% in 2022 to 8.1% in 2024[4]. This drop is partially due to a surge in medical costs, which increased by 25% over the same timeframe. Moreover, the company's profitability was also affected by a cyberattack that occurred last year[1][4]. However, UnitedHealth managed to boost its earnings per share (EPS) by 25%, reaching $27.66 from its initial $22.19 in 2022, with a minor 3% reduction in outstanding shares thanks to $24 billion in stock buybacks[4].
Despite the numerous challenges, UnitedHealth's resilience is evident in its ability to withstand and overcome these obstacles, showcasing the strength of its operations and the enduring potential of its business model.
Reference(s):[1] Gelles D. (2023, March 22). UnitedHealth Medicaid, Medicare Revenue Jumps in Fourth Quarter. The New York Times.[2] UnitedHealth Group (2023, April 8). UnitedHealth Group to Accelerate Digital Adoption and Modernization to Lower Costs and Improve Operational Efficiency. Company Press Release.[3] Shin K. (2023, April 26). UnitedHealth Group's Growing Non-Insurance Revenue Streams. Seeking Alpha.[4] Zacks Equity Research (2023, May 5). UnitedHealth Group (UNH) Q1 Earnings Surpass, Revenues Beat Estimates. Company Earnings Report.
- Despite the 3% drop in UnitedHealth Group's (UNH) stock price since the beginning of 2024, the company's adjusted earnings have substantially increased, leaping from $22.19 in 2022 to $27.66.
- UnitedHealth's trailing P/E ratio has decreased from 23x in 2022 to 18x, making the company an intriguing option for investors seeking potential gains with reduced volatility.
- The OptumHealth segment of UnitedHealthcare, which offers a range of healthcare services, has seen its revenue skyrocket by 48% between 2022 and 2024, largely due to an increased number of patients under value-based care arrangements and boosted sales in both the Medicaid and Medicare segments.
- UnitedHealth's earnings per share (EPS) have increased by 25%, reaching $27.66 from $22.19 in 2022, partly due to $24 billion in stock buybacks, which led to a 3% reduction in outstanding shares.
- UnitedHealth has also invested in digital adoption and modernization, aiming to lower costs and improve operational efficiency, with plans to largely focus on these areas through 2025.
