Morningstar

UnitedHealth’s Momentum Continues; Shares Still Rich

We may increase our fair value estimate to account for cash flows generated since our last valuation change.

Securities In This Article
UnitedHealth Group Inc
(UNH)

UnitedHealth’s UNH strong results continued in the first quarter of 2022, as the firm delivered bottom-line results that were slightly higher than FactSet consensus and increased its 2022 guidance a bit. Our estimates for 2022 will likely remain within management’s new targeted range, but we may increase our fair value estimate by about 5% primarily to account for cash flows generated since our last valuation change. Even after this change, the group’s shares will likely still appear rich to us, especially relative to the company’s MCO peers that have similar growth prospects but trade at lower multiples. Like its peers, UnitedHealth’s economic moat remains narrow, which recognizes the long-term policy risks that the company faces despite its strongholds in medical insurance, pharmacy benefits, caregiving services, and analytical tools.

In the quarter, UnitedHealth delivered strong top- and bottom-line results. Revenue grew 14% to $80 billion with low-double-digit growth from its medical insurance and high-teens growth from its Optum businesses. In medical insurance, total medical membership grew 3% year over year with government-sponsored plans (8% growth) offsetting continued weakness in employer-sponsored plans (flat). The Optum franchises were led by OptumHealth (34% revenue growth), as its local physician network grew and those providers continued to transition to value-based arrangements, which continues to boost revenue per member significantly on just low-single digit consumer growth. OptumInsight (13% revenue growth) and OptumRx (11% revenue growth) performed solidly, too. Compared with a tough comparable period related to COVID trends, UnitedHealth's adjusted EPS grew 3% to $5.49 this quarter, or better than FactSet consensus ($5.36.) With that mild outperformance, management increased its 2022 outlook by a similar rate ($0.10) to between $21.20 and $21.70 per share, and our adjusted EPS estimate for this year will likely remain within that range.

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The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

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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

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