UnitedHealth (UNH, Financial) reported its first quarter earnings results on April 19. UnitedHealth is the Dow Jones Industrial Average’s only healthcare stock focused primarily on healthcare plans. Following its early morning earnings release, the company reported a gain for the day of 2.1%.
Favorable market trading was led by a revenue and earnings beat for the first quarter. UnitedHealth reported revenue of $44.53 billion, beating analysts’ estimates by $570 million and reporting a year-over-year gain of 24.5%. EPS of $1.81 also beat analysts’ expectations and reported a positive gain of 17% year over year.
Strong performance numbers from UnitedHealthcare and Optum, combined with a continued positive outlook for sales in the company’s two main business divisions, helped lead to an increase in guidance for 2016. Resulting from continued strength expected in UnitedHealthcare Employer & Individual and OptumRx, management increased its guidance for 2016 revenue to $182 billion and its guidance for EPS to a range of $7.75 to $7.95.
Currently the stock is trading at a price of $132 with a forward PE of 15.27. UnitedHealth is trading slightly above the average forward PE for healthcare stocks in the Dow Jones Industrial Average. According to Morningstar, investors may also see a decrease in the sector’s forward P/E values, which could be a sign of caution for the healthcare sector overall.
This may likely be caused by UnitedHealth’s plan to exit the Obamacare platform after citing substantial losses from its healthcare listing. Other leading insurers may likely follow UnitedHealth, decreasing the value of the platform overall and the offerings to consumers.
Currently, the Vanguard Health Care Fund (Trades, Portfolio) is one of UnitedHealth’s largest guru shareholders, followed by Dodge & Cox and Jeremy Grantham (Trades, Portfolio). The Vanguard Health Care Fund (Trades, Portfolio) owns 2.47% of the company’s outstanding stock. Dodge & Cox owns 1.46% and Jeremy Grantham (Trades, Portfolio) owns 0.66%.
Disclosure: I do not own any shares of any stocks included in this article.
