3) UnitedHealth Group Incorporated (NYSE:UNH)
Forward P/E as of March 28: ~17.3x
Number of Billionaire Investors: 23
Number of Hedge Fund Holders: 150
UnitedHealth Group Incorporated (NYSE:UNH) operates as a healthcare company. AM Best, a global credit rating agency, noted the company’s balance sheet strength, which the firm believes is strong, its healthy operating performance, very favorable business profile, and robust enterprise risk management (ERM). The firm also stated that UnitedHealth Group Incorporated (NYSE:UNH) has demonstrated a very strong operating performance with a consistent trend of premium growth, aided by enrollment gains across business lines. The company continues to hold the leading market share in all its business lines and on a national basis. Notably, the premiums and earnings remain well-diversified by business segment and geography.
UnitedHealth Group Incorporated (NYSE:UNH)’s FY 2024 operating cost ratio came in at 13.2% as compared to 14.7% in 2023, demonstrating gains from business portfolio refinement and healthy improvement in operating efficiencies and consumer experiences. In 2025, the company expects revenues of between $450 billion – $455 billion, net earnings of $28.15 – $28.65 per share, and adjusted net earnings of $29.50 – $30.00 per share. Moving forward, UnitedHealth Group Incorporated (NYSE:UNH)’s diverse business model and healthy market position can fuel growth. Its strategy includes the expansion of value-based care models and leveraging the scale and analytics capabilities in a bid to gain market share in government insurance markets.
RiverPark Advisors, an investment advisory firm and sponsor of the RiverPark family of mutual funds, published the Q4 2024 investor letter. Here is what the fund said:
“UnitedHealth Group Incorporated (NYSE:UNH): UNH shares were a top detractor in the fourth quarter after reporting mixed operating metrics for the company’s third quarter and giving disappointing guidance for 2025 ahead of the company’s scheduled analyst day. That investor update was to take place in midtown Manhattan on December 4th but was canceled following the horrific murder of the CEO of the company’s insurance division.
Reported fundamentals for the company’s third quarter included slightly better than expected revenue and EPS but also included a higher Medical Cost Ratio (“MCR” – the ratio of claims paid versus premiums collected). Investors had hoped the company would guide to stabilization heading into 2025 but the company guided 2025 MCR to 86-87% or 150 basis points higher than expected. The rise in MCR has been driven by unfavorable member mix and lower state Medicaid rates relative to current member acuity.
With several at-scale and interconnected businesses, UNH occupies a unique position within the U.S. healthcare system. UnitedHealth has (a) a dominant managed care organization in commercial, Medicare and Medicaid markets, (b) a large and growing presence in local care delivery (OptumHealth’s physicians and ambulatory service centers), (c) one of only three at scale pharmacy benefits managers (OptumRx) and (d) a fast-growing healthcare-information technology, consulting and revenue cycle management business (OptumInsight). The combination of the largest managed care organization (UnitedHealth) with the faster-growing, higher-margin Optum services businesses positions the company to capture a large portion of the future growth opportunities in the U.S. healthcare services industry. We expect balanced growth from both health insurance and health services, leading to consistent high-single-digit revenue growth for the company. With margin expansion from scale, share buybacks from its strong cash generating ability (the company currently has $29 billion in cash), and continued strategic acquisitions, we believe the company can generate mid-teens or better earnings growth for the foreseeable future.”
