UnitedHealth Hits 52-Week High on Strong Q4 Earnings

On Jan 21, shares of UnitedHealth Group Inc. (UNH) scaled an all-time new 52-week high of $109.45. The momentum in the stock was driven by better-than-expected fourth-quarter earnings, despite the material and well-documented burden from the Affordable Care Act (ACA).

In 2014, both the top- and bottom-lines exceeded the upper range of the company’s original forecasts for the year.

Notably, this health insurer’s shares rose by 51.8% over the past one year, significantly higher that the S&P 500’s rise of 10.2% during the same time frame. The average volume of shares traded during the day was approximately 8,294K.

The company’s earnings of $1.55 per share beat the Zacks Consensus Estimate by 5 cents and improved 9.9% year over year.

The company’s revenues of $33.4 billion were up 7.4% year over year and marginally ahead of the Zacks Consensus Estimate of $33.0 billion. The year-over-year increase was an outcome of broad-based organic growth and business expansion in both health care benefits and health care services.

Strong results from UnitedHealth reflect solid performance by its health benefits business along with strong growth from the Optum segment, which reached a milestone by surpassing $1 billion in operating earnings in a single quarter for the first time.

Investors’ optimism bounced up on bullish comments by the company for 2015. Management commented that UnitedHealth entered 2015 with momentum from a strong finish to 2014 and with more growth opportunity and fewer impediments than what were encountered over the last few years. UnitedHealth expects high single-digit percentage revenue growth in 2015 with earnings growth potentially reaching the double digits at the upper-end of its earnings range of $6.00 to $6.25.

UnitedHealth also said that it expects revenues from the Medicaid market to grow by 15% to 17% in 2015 and Medicare Advantage membership to grow by 200,000 to 300,000.

UnitedHealth leads other players in reporting earnings every quarter and the results of the insurer gives an idea of the earnings of other players. Strong results from the company have fueled optimism other players. The stocks of Aetna Inc. (AET) and Cigna Corp. (CI) also witnessed a 52-week high of $95.08 and $110.72, respectively.

UnitedHealth carries a Zacks Rank #2 (Buy). Another player – Centene Corp. (CNC) – with a Zacks Rank #1 (Strong Buy) is also worth considering.