Today was a big day for UnitedHealth Group (UNH). UNH shares climbed after the company made some gamechanging announcements. This has people asking me whether there’s still time to buy the health insurer, so let’s dig into the details.
First, the country’s largest health insurer announced strong results for the third quarter. Compared with Q3 2015, revenues rose 11.6% to $46.3 billion. This was slightly higher than analysts’ estimates of $46.09 billion in revenue. While all of UnitedHealthcare’s domestic businesses posted double-digit revenue growth, its Optum business stood out with 34% annual growth.
Meanwhile, earnings from operations jumped 19% year-on-year to $3.6 billion. Adjusted earnings per share increased 23% to $2.17; this beat the $2.08 consensus EPS estimate by 4.3%.
Pleased with these results, UnitedHealth Group lifted its earnings outlook for 2016. Management is now targeting earnings of $8.00 per share, up from its previous guidance of $7.80 to $7.95 per share.
As a reminder, UnitedHealth Group is moving away from its businesses in the Affordable Care Act; it will remain in just a few states going forward. This, coupled with its growing Optum business, bodes well for UnitedHealth going forward.
UNH remains one of my top healthcare plays. With a dividend yield of 1.7%, it trades at less than 15 times forecasted earnings. For all of these reasons, I consider UNH a B-rated Buy.