UnitedHealth Group (NYSE: UNH) just lately reported its Q3 outcomes, with revenues and earnings exceeding our expectations. The corporate reported income of $100.8 billion and adjusted earnings of $7.15 per share, in comparison with our estimates of $99 billion and $6.95, respectively. Regardless of an upbeat efficiency, UNH inventory dropped as a lot as 10% on Tuesday, October 15, as the corporate’s outlook fell wanting expectations. On this be aware, we talk about UnitedHealth Group’s inventory efficiency, key takeaways from its latest outcomes, and valuation.
How Did UnitedHealth Carry out In Q3?
UnitedHealth Group’s revenue of $100.8 billion in Q3 displays a 9% y-o-y progress, led by increased gross sales in each UnitedHealth and Optum segments, which grew 7% and 13% (y-o-y), respectively. The important thing metric which buyers have been eyeing was the medical care ratio, which got here in at 85.2%, versus 82.3% within the prior-year quarter. This was increased than our estimates of a 200 bps rise. The working margin contracted 60 bps to eight.6%. The corporate reported an adjusted EPS of $7.15 per share as in comparison with $6.56 within the prior yr quarter.
Total, the corporate navigated properly in Q3, with a beat on each high and backside line. Nonetheless, buyers weren’t proud of the outlook for each 2024 and 2025. The corporate narrowed its 2024 earnings outlook from $27.50 to $28.00 per share to $27.50 to $27.75 per share. It additionally acknowledged that it expects $30 on the high finish for the 2025 earnings, a lot beneath our in addition to the consensus estimates of over $31. It seems that the medical prices aren’t going to return down anytime quickly, and this may increasingly proceed to weigh on UnitedHealth’s efficiency over the approaching quarters.
What Does This Imply For UNH Inventory?
It’s evident from the decline in UNH inventory that the buyers weren’t proud of the outlook. We’ve additionally trimmed our estimates for UNH. We now estimate UnitedHealth Group’s Valuation to be $552 per share, near its present ranges of $560. This represents a 20x P/E a number of and anticipated earnings of $27.65 on a per-share and adjusted foundation for the complete yr 2024. The 20x P/E ratio is barely beneath the inventory’s common P/E ratio seen during the last three years. We expect a slight dip in valuation a number of appears justified, given the influence of upper prices on the corporate’s anticipated earnings subsequent yr.
UNH inventory has seen a 12% rise this yr, underperforming the broader S&P500 index, up 22%. Though UNH is considered one of a handful of shares which have elevated its worth in every of the final three years, however that also wasn’t sufficient for it to persistently beat the market. In distinction, the Trefis Excessive High quality (HQ) Portfolio, with a set of 30 shares, is much less risky, and it has outperformed the S&P 500 every year over the identical interval. Why is that? As a bunch, HQ Portfolio shares supplied higher returns with much less danger versus the benchmark index; much less of a roller-coaster trip, as evident in HQ Portfolio efficiency metrics.
Whereas UNH inventory appears to be like totally valued, it’s useful to see how UnitedHealth Group Friends fare on metrics that matter. You can see different worthwhile comparisons for corporations throughout industries at Peer Comparisons.
| Returns | Oct 2024 MTD [1] |
2024 YTD [1] |
2017-24 Whole [2] |
| UNH Return | -1% | 12% | 307% |
| S&P 500 Return | 1% | 22% | 160% |
| Trefis Strengthened Worth Portfolio | 0% | 15% | 767% |
[1] Returns as of 10/16/2024
[2] Cumulative whole returns for the reason that finish of 2016
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The views and opinions expressed herein are the views and opinions of the creator and don’t essentially mirror these of Nasdaq, Inc.
