We are upgrading our recommendation on UnitedHealth Group (UNH) to Outperform from Neutral as we believe the company will beat consensus estimates helped by lower medical utilization since both Medicare and Commercial cost trends remain at historical lows.
The company's health benefits business UnitedHealthcare is performing strongly with its reputable service, value and innovation of affordable benefit products, combined with balanced and trusted local market engagements. The unit has recorded increased memberships even amid a soft employment scenario. The company is also gearing itself to increase its earnings from the Health Services business and has made a number of acquisitions in this segment.
Our six-month target price of $57.00 equates to about 13.2x our earnings estimate for 2011. We view the $0.65 per common share annual dividend as secure, implying an expected return of about 21% over that period. This is consistent with our Outperform recommendation on the shares.
UNITEDHEALTH GP (UNH): Free Stock Analysis Report
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