As UnitedHealth Lowers Guidance, Stock Looks Cheap

As I expected, UnitedHealth (UNH) lowered its profit guidance for this year. The company now sees EPS coming in between $2.95 to $3.05.

Chief Executive Stephen J. Hemsley noted the quarter's results were hurt by lower margins, adding that second-quarter weakness also stems from reduced margins at its risk-based businesses and Medicare operations. "We are continuing to take the aggressive specific steps necessary to improve our operating performance, as well as to better position our organization for sustained future growth," he said. To stop weakness in the risk-based operations, the company has been letting go of some customers who didn't generate enough profits.

The company is also paying about $900 million to settle two class-action lawsuits regarding the back-dating of stock options. Assuming the current forecast is correct, then UNH is a very cheap stock. The shares are up nicely as of yesterday.

Comments

[Fighting Yoda:]

UNH will become cheaper, HMO/Medicare/Adv-Med sector is not in favor.

Avoid

2008 Jul 03 03:47 AM

[User 220541:]

This sector is grabling with rising cost, low margins and this company still have lots of issues. This is a stock to stay away from until 2009

2008 Jul 03 07:09 AM

[H-Bomb:]

User 220541,

What is "grabling"?

2008 Jul 03 07:30 AM