Title: Is UNH Stock Set for a Comeback?
UnitedHealth Group (NYSE: UNH) released its Q4 earnings, with revenues falling short and earnings surpassing market expectations. The company recorded revenues of $100.8 billion and adjusted earnings of $6.81 per share, compared to the projected $101.8 billion and $6.72, respectively. Though earnings beat estimates, UNH stock dropped by 6% on January 16, 2023, due to escalating medical costs.
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UNH's Q4 Performance
UnitedHealth Group's Q4 revenue of $100.8 billion signifies a 7% year-over-year increase, with higher sales in both the UnitedHealth and Optum segments, reporting growths of 5% and 9% respectively. The medical care ratio, a key investor focus, stood at 87.6%, significantly higher than the prior-year quarter's 85%. This higher figure contrasted the estimated 100 basis points rise. The company presented an adjusted EPS of $6.81 per share compared to $6.16 in the previous year's quarter.
Although the company registered a beat on the bottom line, investors reacted negatively to the increased medical costs and a bleak outlook for 2025. The company anticipates medical costs to remain high in 2025, reflected in the 2025 earnings outlook of $29.50 to $30.00 per share.
Implications for UNH Stock
The decline in UNH stock indicates investors' displeasure with the escalating medical costs. Since the start of 2024, UNH stock has dropped by 1%, in contrast to the 25% surge seen in the S&P500 index. For a more consistent and less volatile return, consider the high-quality portfolio, which has outperformed the S&P 500 considerably since its inception.
As the economic outlook remains uncertain due to potential rate cuts and White House changes in 2025, will UNH underperform the S&P 500 for the next 12 months, or may it see substantial growth? Evaluating UNH from a valuation perspective, the stock appears poised for growth at its current $510 price, trading at 17x expected earnings of $29.75, which is below the stock's average P/E ratio of 21x over the recent three-year period.
To gain more insight, explore how UNH peers perform on relevant metrics. Visit Peer Comparisons for comprehensive comparisons across various industries.
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The Q4 earnings report from UnitedHealth Group (UNH) showed a revenue increase of 7%, with revenues of $100.8 billion, largely driven by growth in both the UnitedHealth and Optum segments. However, the medical care ratio for UNH was higher than expected, leading to investor concern and a 6% drop in UNH valuation on January 16, 2023.
Despite beating earnings expectations, UnitedHealthcare's stock struggled, with the company anticipating high medical costs to continue in 2025, leading to a more conservative earnings forecast. This contrast in performance has led to a 1% drop in UNH stock since the start of 2024, while the S&P 500 index has seen a 25% surge during the same period.
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