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UnitedHealth's (UNH) Solid Earnings View Buoys Investor Hopes

UnitedHealth Group Inc. UNH has provided an initial outlook for 2020 and 2021.

For 2020, the company expects revenues to be approximately $257 billion with net earnings anticipated to be $15.90 per share and adjusted net earnings to be $16.75. The revenue as well as adjusted earnings projection is indicative of 6.2% and 10.9% growth each from the respective 2019 reported numbers.

For 2021, the company expects its revenues in the range of $277-$280 billion, net earnings to be within $16.90-$17.40 per share and adjusted net earnings in the $17.75-$18.25 band. The company predicts to incur $1.80 per share due to COVID-19 effects, such as treatment and testing costs, the residual impact of people deferring care in 2020, and unemployment and other economic factors.

Cash flows from operations are expected to vary from $20 billion to $21 billion in 2021.

The company’s revenues have grown consistently over the past years, witnessing a CAGR of 11% from 2010 to 2019. In the first nine months of 2020, the top line was up 5.7% year over year. We believe, the company should retain its revenue momentum in the years ahead on the back of its strong market position and attractive core business that are steadily driven by new deals, renewed agreements and expansion of service offerings.

In 2021, the company seeks growth from individual Medicare Advantage, group Medicare and Medicaid business. The period will mark UnitedHealthcare’s largest Medicare Advantage footprint expansion in five years, reaching an extra 3.2 million people in nearly 300 additional counties. Growth in Medicaid business is expected from transitions in coverage and net new market gains.

Its Optum business is another key catalyst. Its subsegment Optum Rx is expected to witness geographic expansion with an increasing number of integrated community pharmacies — by more than 60 centers — in 2020. Also, the number of patients served with its infusion services will rise at a double-digit rate, marking a durable growth trend in 2021.

As a leading health insurer, UnitedHealth Group has been able to weather the current economic uncertainties and tough operating conditions triggered by COVID-19 by virtue of its diversified business profile and a solid balance sheet. Further, the company’s bullish outlook should instill investor’s confidence in the stock with a history of recurrent estimate beats.

The Zacks Consensus Estimate for the company’s current-year earnings and revenues is expected to grow 11.1% and 6.01%, respectively.

In six months’ time, the stock has gained 12.7% compared with the industry’s growth of 8.3%. Other stocks in the same space including Anthem Inc. ANTM, Humana Inc. HUM and Centene Corp. CNC have also rallied 9.2%, 3.4% and 3%, respectively.

UnitedHealth currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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