1. UnitedHealth Group Incorporated (NYSE:UNH)
Number of Hedge Fund Holders: 114
5-year Beta (Monthly): 0.59
UnitedHealth Group Incorporated (NYSE:UNH) is a leading healthcare and well-being company, providing a range of health benefits and services to improve the quality and accessibility of care. Operating through its two primary divisions, UnitedHealthcare and Optum, the company supports individuals, employers, and government programs across the U.S. and internationally.
It delivers health insurance plans and services, focusing on the needs of individuals, families, and specialized populations, while Optum integrates health services and technology to enhance care delivery, manage complex medical needs, and optimize healthcare costs.
UnitedHealth (NYSE:UNH) reported strong Q3 earnings with non-GAAP EPS of $7.15 outperforming the estimates by $0.12 and revenue of nearly $101 billion was up over 9%, exceeding the estimates by $1.52 billion. It was driven by $2 billion growth in OptumHealth, $5 billion in OptumRx, and stability in OptumInsight, with a $33 billion backlog.
The company expanded its domestic commercial membership by over 2.4 million in the first three quarters, while Medicaid business secured new contracts across multiple states. It expects growth in Medicare Advantage and OptumRx. The company plans a conservative start to 2025 given the second year of Medicare rate cuts, IRA impacts, and Medicaid funding lags but aims for steady progress on its long-term objectives.
UnitedHealth’s (NYSE:UNH) adjusted earnings for 2024 are projected between $27.50 and $27.75 per share, factoring in disruptions from a recent cyber-attack and unexpected care costs. We discussed the cyber attacks in our 10 Worst Performing Dow Stocks Year-to-Date article.
In its Q3 investor letter, Wedgewood Partners said that the company was a top contributor to the portfolio in Q3 as its shares rebounded over the quarter. By adjusting Healthcare pricing and focusing on value-based care through Optum, which saw over 15% income growth, UnitedHealth (NYSE:UNH) effectively counters medical cost inflation. This strategy, particularly beneficial for Medicare, reduces healthcare costs and improves patient outcomes through preventive and home-based care.
Moreover, Baron Health Care Fund stated the following regarding UnitedHealth Group Incorporated (NYSE:UNH) in its Q3 2024 investor letter:
“UnitedHealth Group Incorporated (NYSE:UNH) is a leading health and well-being company that operates across four segments: UnitedHealthcare, Optum Health, OptumInsight, and OptumRX. Despite complex Q2 results that involved multiple adjustments and an elevated medical loss ratio that management attributed to a cyberattack on its Change Healthcare platform, shares increased on positive management comments and reaffirmation of adjusted EPS guidance for 2024. We believe UnitedHealth should continue to see strong growth and profitability, driven by positive demographic trends and its ability to manage costs by leveraging its size and scale, continuing its industry-leading technology investments, expanding its expertise in population health, and growing its portfolio of providers.”
While we acknowledge the potential of UnitedHealth Group Incorporated (NYSE:UNH) as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than UNH but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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