UnitedHealth
The latter trend is certainly likely to keep growing at a rate faster than the economy's growth and overall inflation due to the aging population, shortage of healthcare workers, gaps in infrastructure, government subsidies, and development of new treatments. Employment is also quite strong and getting close to pre-pandemic levels.
However, UnitedHealth's stock has pulled back about 10% along with the broader market. One factor is that overall inflation is rising and is expected to remain elevated for the next couple of years. This marginally reduces the demand for stocks like UnitedHealth whose main appeal is its steady growth rate and dividend hikes which are more attractive in a low-growth and low-inflation world.
Inside the Numbers
In Q4, the company results came in-line with expectations, and it affirmed its guidance for the full year. Earnings per share were 78% higher than last year at $4.48, beating expectations of $4.31. Revenue rose 12.6% to $73.7 billion above analysts' estimates of $73.1 billion. Medical costs as a share of premiums came in at 83.7% in Q4.
It also affirmed its 2022 guidance EPS of $21.10 to $21.60, in-line with estimates. The company indicated that enrollment into Medicare Advantage plans also are strong. This is in contrast to Humana which warned about flagging enrollment which has been one factor in the sector's weakness.
Recently, the stock has pulled back to its 50 day moving average. Its recent 10% drop is the largest since the March 2020 bottom. If the stock market does bottom and keep moving higher, then UnitedHealth is likely to return to its previous highs.
Despite its long-term outperformance, Unitedhealth remains attractive from a value perspective with a forward P/E that's cheaper than the S&P 500
