Morningstar

UnitedHealth Closes Out Strong 2021

The group's shares continue to look moderately rich to us.

Securities In This Article
UnitedHealth Group Inc
(UNH)

UnitedHealth Group UNH closed out 2021 strong with slightly better bottom-line results than our expectations, and management maintained the 2022 guidance initially given at its November investor day, including for the important Medicare Advantage end market. With our expectations roughly in line with 2022 guidance, especially on a cash flow basis, we anticipate maintaining our fair value estimate for UnitedHealth. The group's shares continue to look moderately rich to us, especially relative to MCO peers that have similar growth prospects but trade at lower multiples. Like its peers, UnitedHealth's economic moat remains narrow, which recognizes its top-tier position in medical insurance, pharmacy benefits, caregiving services, and analytical tools offset by long-term policy risks.

In the quarter, UnitedHealth delivered strong top- and bottom-line results. Revenue grew 13% to $73.7 billion with low-double-digit growth from its medical insurance operations and midteens growth from its Optum businesses. In medical insurance, total medical membership grew 5% year over year with government-sponsored programs (10% growth) offsetting continued weakness in employer-sponsored plans (1% growth). The Optum franchises were led by OptumHealth (33% revenue growth), as its local physician network grew organically and inorganically and those providers continued to transition to value-based arrangements, which is helping boost revenue per member significantly on just low-single-digit consumer growth. OptumInsight (12% revenue growth) and OptumRx (7% revenue growth) performed solidly, too. With those strong results, management turned in better adjusted EPS ($4.48) than FactSet consensus ($4.30) in the quarter. However, management merely maintained its guidance for 2022, and our expectations for 2022 appear roughly in line with management's outlook, including between $21.10 and $21.60 of adjusted EPS and $23 billion to $24 billion of operating cash flow.

Morningstar Premium Members gain exclusive access to our full analyst reports, including fair value estimates, bull and bear breakdowns, and risk analyses. Not a Premium Member? Get this and other reports immediately when you try Morningstar Premium free for 14 days.

More in Stocks

Consumer Defensives: Despite Angst, Thirsty Investors Have Names to Pursue

Estee Lauder, Kraft Heinz, and Dollar General are our top consumer defensive stocks.
Erin Lash, CFA

Industrials: Many Stocks Overvalued After Q3 Outperformance

Our top stocks in this sector are Chart Industries, Wesco, and CNH Industrial.
Brian Bernard, CFA, CPA

Basic Materials: Despite Index Rise, We See Multiple Long-Term Opportunities

In this sector, our favored stocks are Albemarle, Dow, and FMC.
Andrew Bischof, CFA and Travis Miller

About the Author

Julie Utterback, CFA

Senior Equity Analyst
More from Author

Julie Utterback, CFA, is a senior equity analyst, AM Healthcare, for Morningstar*. She focuses on medical technology and service companies. She covers managed care organizations including UnitedHealth, service providers like HCA, medical suppliers such as Baxter, and life sciences companies like Danaher. She is also the chairperson of the equity research team’s capital allocation methodology.

Before joining Morningstar in 2005, Utterback was an equity analyst at State Farm Insurance for several years. Utterback joined Morningstar in 2005 as an equity analyst in the healthcare industry, and initially she primarily covered medical technology companies, including orthopedic device, medical equipment, and cardiac device firms. In 2010, she joined Morningstar's credit research team, initiating coverage of the entire healthcare industry and generally helping the organization expand and maintain its credit coverage across many industries. She held that senior credit analyst role until April 2019, when she returned to the equity team to cover medical technology and service companies.

Utterback holds a bachelor's degree in finance from the University of Illinois Urbana-Champaign’s Gies College of Business. She also holds the Chartered Financial Analyst® designation.

* Morningstar Research Services LLC (“Morningstar”) is a wholly owned subsidiary of Morningstar, Inc

Sponsor Center