The dramatic plunge in shares of UnitedHealth Group Incorporated (NYSE:UNH) appears driven by congressional testimonies from the CEOs of major drug firms. Markets all but erased the gains that followed the company’s strong fourth-quarter earnings report. Even though it appears likely that UNH stock will re-test lows not seen since the December 2018 bear market selloff, smart value investors should decide now if the stock will climb back to the $270 - $285 range. With strong performance from Optum, UnitedHealth’s Health Services Platform, chances are good the stock will continue the 7% rebounded that started last week.
Strong Fourth Quarter Revenues
Investors had more than UnitedHealth’s $226 billion in quarterly revenue, up 12% year-on-year, to appreciate. Optum’s revenue crossed the $100 billion level for the first time, helping to add to the $3.10 EPS in the quarter. UNH earned $12.19 a share for the full year, valuing the stock at 20.8 times earnings. Its 2019 EPS outlook for 2019 is even better, with net earnings expected to come in at $13.70 - $14.00 a share. That brings down the forward P/E to 15.3 times.
These multiples are noteworthy because UNH’s revenue growth will likely accelerate at a faster rate, thanks to the positive contributions of Optum. In 2018, the unit only added modestly to results. Yet as UNH continues to dedicate itself to improving health and wellness, saving money for the customers it serves, profits will grow.
UNH By the Numbers
UnitedHealth added 2.4 million more people in 2018. Full earnings grew 7.2% to $9.1 billion. In the fourth quarter, earnings still grew even though the Medicaid program did not perform so well.
Optum, which is a health services business, is a particularly relevant positive growth catalyst for the company because of how it embraces technology. Tech investors may instead look at buying
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