Why UnitedHealth Rules Among Health Care Stocks – Forbes

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Photographer: Dawn Villella/Bloomberg News.

Never mind that the Republican-controlled Congress can’t seem to get its act together to repeal, much less replace, the Affordable Care Act, more popularly known as Obamacare. But health care stocks are doing just fine, in spite of the continued wrangling in Washington over “repeal and replace,” making the future of the health insurance market anyone’s guess.

“But whatever emerges, UnitedHealth Group (UNH), the nation’s largest health insurer, is in the best position to thrive,” asserts Stephen Leeb, president of Leeb Asset Management and editor of the market newsletter, The Complete Investor.

UnitedHealth Group, whose market capitalization of more than $160 billion dwarfs Aetnas’ $46.5 billion and Anthem’s $4.2 billion, the two largest rivals of UNH, isn’t just a health insurer. Although that business accounts for 65% of its revenues, UNH’s Optum unit operates three other faster-growing segments: data and analytics, pharmacy benefits management, and urgent-care services. Revenues in 2016 from the units rose 23.7% compared to 13.1% growth for the health insurance business.

That helped expand  UnitedHealth’s total 2016 revenues, to $184.8 billion, up from $157.1 billion in 2015, noted Leeb. Net earnings also got a big push, leaping 24%, to $7.48 a share. For 2017, management has guided analysts for revenues rising to around $197 billion-$199 billion, and net income jumping to $8.75-$9.15 a share.

A leader in health care management, UnitedHealth provides a broad range of health care products and services, including health maintenance organizations (HMOs), point of service plans, and preferred provider organizations.

It isn’t surprising that UnitedHealth’s revenues and earnings have been consistently on the rise. They reflect the company’s long-term record of fast-paced sales growth, says Leeb, who points out that between 2010 and 2016, revenues boomed from $94.2 billion to $184.8 billion, a jump of 96.2%. That’s an annualized rate of 10.1%, Leeb notes, up from the annualized gains of 9.2% for Aetna and 5.5% for Anthem.

Little wonder that UnitedHealth’s stock has been a super performer, leaping to $180 a share on June 6, 2017, up from $120 a share in September, 2016. CFRA Market Advisor, which rates UnitedHealth’s stock a buy, has a 12-month price target of $191.