Multifaceted healthcare company UnitedHealth Group Incorporated (UNH) is scheduled to release its first quarter 2023 financial results on April 16, 2024. Wall Street expects the company to report an EPS of $6.62 for the quarter, indicating a 5.8% year-over-year improvement. Its revenue for the quarter is expected to increase 8% year-over-year to $99.30 billion.

Given the promising analysts' estimates, the company is anticipated to deliver strong results. Hence, the stock might present a solid buying opportunity at present. Let's delve into further compelling reasons to consider purchasing the stock now.

As of December 31, 2023, UNH's business catered to 52.75 million individuals, marking a 2% year-over-year increase. This positive trend was mainly driven by the expansion of membership in the company's domestic commercial and Medicare Advantage sectors.

In February, UNH's Change Healthcare division fell victim to a cyberattack and is currently in the process of recovery. The attack severely disrupted healthcare operations, impacting claims processing and payments. In response, both UNH and the federal government stepped in to offer temporary assistance to affected care providers. Notably, UNH has boosted its advance payments to financially strained healthcare providers, now exceeding $2.50 billion, a notable increase from the initially disclosed $2 billion.

On the bright side, it was reported that Steward Health Care, facing challenges, had decided to sell its physician network, Stewardship Health, to UNH. The acquisition by UNH's Optum Care includes primary care providers and clinicians across eight states and all of Stewardship's stock. The acquisition could provide UNH with a competitive advantage by offering a broader range of healthcare services and capturing a larger market share.

Shares of UNH fell marginally intraday to close the last trading session at $439.20.

Here are the fundamental aspects of UNH that could influence its performance in the near term:

Solid Financials

UNH’s total revenues for the fiscal fourth quarter that ended December 31, 2023, increased 14.1% year-over-year to $94.42 billion. Its earnings from operations rose 11.6% year-over-year to $7.69 billion. Adjusted net earnings attributable to UNH common shareholders and adjusted EPS stood at $5.76 billion and $6.16, up 13.8% and 15.4% from the prior-year quarter, respectively.

As of December 31, 2023, its total current assets stood at $78.44 billion, compared to $69.07 billion as of December 31, 2022.

Stable Dividend Policy

On March 19, UNH paid a quarterly cash dividend of $1.88 per share to common stockholders. It has consistently delivered dividends for 21 years, showcasing its strong shareholder payback track record.

The company’s annualized dividend rate of $7.52 per share translates to a dividend yield of 1.71% on the current market price, higher than its four-year average yield of 1.32%. UNH’s dividend payments have grown at CAGRs of 14.6% and 15.9% over the past three and five years, respectively.

Impressive Historical Growth

Over the past three years, UNH’s revenue and EBITDA increased at a CAGR of 13.1% and 12.8%, respectively. Its net income and EPS grew at respective CAGRs of 13.3% and 14.2% over the same period.

Favorable Analyst Estimates

Street expects UNH’s EPS and revenue to rise 9.6% and 7.7% year-over-year to $27.54 and $400.32 billion in the fiscal year 2024. Moreover, the company has surpassed the consensus revenue and EPS estimates in each of the trailing four quarters.

Discounted Valuation

In terms of trailing-12-month EV/Sales, UNH is trading at 1.14x, 67.1% lower than the industry average of 3.47x. Its trailing-12-month P/S of 1.01x is 71.8% lower than the 3.58x industry average. Moreover, UNH’s trailing-12-month non-GAAP P/E multiple of 15.95 is 15.6% lower than the 18.90 industry average.

Higher-Than-Industry Profitability

UNH’s trailing-12-month EBIT margin of 8.71% is 993.1% higher than the industry average of 0.80%. The stock’s trailing-12-month levered FCF margin of 5.33% is 718.2% higher than the 0.65% industry average. Furthermore, its trailing-12-month asset turnover ratio of 1.43x is 260.9% higher than the industry average of 0.40x.

POWR Ratings Show Promise

UNH’s robust fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to a Buy in our proprietary rating system. The POWR Ratings are calculated by taking into account 118 different factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. UNH has a B grade for Stability, consistent with its 24-month beta of 0.35.

UNH is ranked #5 in the 11-stock Medical – Health Insurance industry. The industry is B-rated.

Click here to access UNH’s Growth, Value, Momentum, Quality, and Sentiment ratings.

Bottom Line

Despite UNH’s rising costs incurred from the recent cyber-attack, anticipated first-quarter results are expected to showcase the benefits of increased premiums driven by a growing membership base. This surge is mainly attributed to higher premiums across both Optum Health and its health benefits divisions.

Moreover, the acquisition of Stewardship Health by UNH's Optum Care expands its services and market reach.

Backed by its robust financial performance, strong profitability, and stable beta, UNH could be an ideal investment. With anticipation building for the upcoming first-quarter earnings release, the stock appears to be a solid choice.

How Does UnitedHealth Group Incorporated (UNH) Stack up Against Its Peers?

While UNH has an overall grade of B, equating to a Buy rating, you may also check out these other A and B-rated stocks within the Medical – Health Insurance industry: Cigna Corp. (CI), Elevance Health, Inc. (ELV), and Molina Healthcare, Inc. (MOH).

For exploring more A and B-rated Medical – Health Insurance stocks, click here.

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UNH shares were trading at $446.91 per share on Monday morning, up $7.71 (+1.76%). Year-to-date, UNH has declined -14.78%, versus a 7.98% rise in the benchmark S&P 500 index during the same period.

Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.

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