Healthcare Sector Ideas

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UnitedHealth Group (UNH) - >>> Boasting a market cap of $477 billion, UnitedHealth is one of the biggest revenue generators in the world. This global mega-cap provides healthcare products and insurance services. Its activities are split into two separate segments: UnitedHealthcare, which offers health insurance, and Optum, which offers data and technology services.


https://finance.yahoo.com/news/rob-arnott-says-time-buy-233751545.html


The worldwide health insurance industry is seeing robust growth and the stock has reaped the benefits; UNH shares have bettered the S&P 500’s annual performance in all but one of the last 10 years, 2022 included.

That said, that has not materialized so far in 2023, as investors reacted negatively to the recently reported Q1 numbers. That might seem weird at first glance, considering the results beat expectations on both the top-and bottom-line. Revenue increased by 14.7% year-over-year to $91.9 billion, trumping Street expectations by $2.12 billion. Adj. EPS of $6.26 came in $0.18 above the $6.08 forecast. As for the outlook, the company raised its adjusted net earnings forecast from the prior range of $24.40-$24.90 to between $24.50 to $25.00 per share. The consensus had previously been at $24.93.

Despite increasing its outlook, Deutsche Bank analyst George Hill thinks the relatively tame raise is partly to blame for investors’ disappointed reaction.

“UNH management was particularly vague on the outlook for its fully capitated care delivery business as a result of the final rate notice and we consider the guidance raise of 10c (in line with the beat) relatively pedestrian by UNH standards,” Hill explained.

However, that does little to change Hill’s bullish thesis: “We continue to see the company as a high-quality defensive name in the large-cap healthcare services space given UNH’s increasing diversification into complementary businesses and the continued erosion of regulatory risks, which is reflected in the premium we granted in our target multiple.”

To this end, Hill has given UNH a Buy rating and a $627 price target, indicating potential growth of 22.5% over the next year. (To watch Hill’s track record, click here)

Overall, UNH has the bulls on its’ side; barring one skeptic, all 8 other recent reviews are positive, providing the healthcare giant with a Strong Buy consensus rating. The analysts see shares rising by 18% in the months ahead, considering the average target clocks in at $605.11.

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