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UnitedHealth Group (UNH - Free UnitedHealth Stock Report), the country's largest managed care company, and a Dow-30 component, announced its fourth-quarter results earlier this morning. Revenues came in ahead of both our and Wall Street's expectations. Earnings, on the other hand, were a couple of pennies below our call, but in line with the consensus. The shares are largely treading water in early morning trading. We would pin this to the fact that UNH had easily bested earnings in a number of linked quarters. Plus, the early onset of flu season may have some investors that play this sector nervous. Such skittishness is being offset by the nice revenue gain with regard to the latter . . .

The top line increased by 11% on a year-over-year basis, to $28.8 billion, as the company, which provides healthcare benefits through both employer and government paid insurance plans and serves the individual and military markets, continued to benefit from consumers cutting back on their medical services because of the slow-growing economy. Premiums were up 11% in the term. Taking in premiums while having its cost contained by this phenomenon has been a boon to UnitedHealth's revenues, more than offsetting the sizable amount of capital that it is spending to adapt to new industrywide rules tied to the 2010 Patient Prevention and Affordable Care Act. For the full year, the top line came in at $110.6 billion, $1 billion above our estimate, and 9% greater than 2011's figure.

These financial outlays have kept share net growth constrained a bit, but the company was still able to post earnings of $1.20 in the final quarter of 2012, two pennies shy of our call. This sum brought the annual tally to $5.28 a share, an impressive 12% leap, especially when considering the changing landscape of this field in the present day. Subscribers should note, a dip in the number of shares outstanding due to buyback activity also aided this showing some, as did a much smaller gain due to claims left over from earlier periods. United posted only $140 million worth of this designation in the term versus $310 million in the like period for 2011. Medical costs rose 12% in total, the vast majority of which was alleviated by the earlier mentioned premium hike.

At its Optum unit, which provides consulting and technology services to hospitals, governments and other clients and manages drug-benefit plans for employers, earnings jumped 65%. This division, though still small compared to the bread-and-butter healthcare benefits arm, has immense potential, especially when factoring in the quickly rising needs of medical insurance companies to get in line with new mandates brought on by the aforementioned sweeping reform. In-house goals are likely to double this segment's overall profit by 2015.

Elsewhere, UNH finished 2012 with 6% growth in its membership base. That metric is now 83.7 million lives. This feat is worth noting because most of its peers have struggled with enrollment of late, as lofty unemployment in the United States has rendered a hefty portion of the population uninsured. UnitedHealth has been able to boost its membership results by becoming active in other parts of the Americas. For example, it purchased a 65% stake in Brazil's Amil Participaceos for $3.5 billion during the quarter. This entity is the largest health insurer in Brazil and owns hospitals and clinics. Further, management has revealed that a plan to increase this position by 25% via the buying of shares from the public is in the works and should be completed during the first half of 2013. International revenues are still a very small slice of the pie, but the opportunities in regions of this nature are immense. Make no mistake, we look for more deals of this kind in the coming years.

Looking ahead to 2013, management announced a forecasted revenue range of between $123 billion and $124 billion. We will be placing our figure in the middle at $123.5 billion for now. As far as earnings go, guidance was provided for share net in the neighborhood of $5.25-$5.50 a share. We are placing our total at the apex of that field, and feel the need to note that often times the initial stance is conservative. That said, assuming no hiccups in aligning operations with reform changes, upside exists with this prospective bottom-line figure.

Patient investors have a strong play here. We like this blue chip's total return potential for the stretch to 2015-2107. Having been only recently added to the Dow 30, we look for this company to lead the way for the managed care sector into the future.

About The Company:UnitedHealth Group is a diversified health and wellbeing company. It offers products and services to more than 70 million individuals through two business segments: UnitedHealthcare (network-based health care benefits) and Optum (information and
technology based health services).

At the time of this article’s writing, the author did not have positions in any of the companies mentioned.