UnitedHealth Group Inc. Beats Wall St Earnings Estimates

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UnitedHealth, the Minneapolis, Minnesota based health insurance company reported fourth quarter earnings today before the opening bell. The insurer reported earnings per share of $1.55, on revenue of $33.43 billion.  Total revenue rose more than 7% from last year and net income from last year was $1.41 per share.  Analysts were forecasting an average earnings per share of $1.50, on revenue of $33.09 billion.

UnitedHealth CEO optimistic about 2015

UnitedHealth CEO, Stephen Hemsley has said that he is very optimistic going into 2015, “with a positive outlook and rising business momentum”. Despite the taxes and fees associated with the Affordable Care Act on insurers, UnitedHealth said during the earnings call that the legislation cut into earnings by about $1 billion or $1.00 per share.  However, they are expecting a smaller payment to federal government in 2015, while posting double digit earnings growth.  Full year expectations are estimated by the company to come in between $6.00-6.25 per share.  UnitedHealth Group has already returned 6.05% in 2015, after posting a very successful 2014 return of 34%.  Shares of UnitedHealth hit a new all time high today after the earnings report.

According to Candlestrips.com, smart money has been buying the dips in UnitedHealth with inflows of $203.01 million and outflow of $122.14 million, netting $80.87 million inflow or an up/down ratio of 1.66.  With today’s earnings strength on the US’s largest insurer, the phenomena of smart money continuing to buy the dips will most likely continue, helping provide fuel for the rally.

UnitedHealth’s relatively solid fundamentals

Despite outperforming the S&P 500 last year and a continuation of the rally this year, UnitedHealth still has relatively solid fundamentals with a price to earnings of 18.86, and price to forward earnings of 17.11.  Price to sales is undervalued at .79, price to book is overvalued at 3.14, price to cash is at 11 and price to free cash flow comes in at 25.57. Management efficiency ratios are decent for an insurer as well: return on assets of 6.6%, return on equity of 17%, and return on investment of 13%. Margins are ok with an operating margin of 7.8% and profit margin of 4.3%. Total debt to equity calculates to .54 and cash per share is solid at 9.60.  The company is rated a “buy” by analysts and currently pays an annual dividend of 1.42%.

Being that UnitedHealth is the first insurer to report earnings, many analysts and health care sector investors view their earnings as sort of a bellwether for how other insurers could report in the coming weeks.  Despite that fact, UnitedHealth is arguably the strongest and most resilient health insurer in the industry and while other insurers may post an earnings beat, it will be tough to outshine UnitedHealth’s spectacular full year and fourth quarter for 2014.  According to analysts and smart money, 2015 will be another impressive year for UnitedHealth Group.

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