Tags: UnitedHealth | Group | Healthcare | UNH | insurance | costs

UnitedHealth Group: A Beacon in the Healthcare Storm

By Dan Weil   |   Tuesday, 03 May 2011 02:25 PM

The healthcare industry faces an array of well-documented problems, ranging from rising costs to inadequate insurance coverage for many Americans. Despite the litany of woes, abundant profit opportunities exist for many companies in the sector.

One of them is UnitedHealth Group (UNH). It provides health insurance and related services to more than 75 million customers across the globe. UnitedHealth offers insurance for workers at more than half of the Fortune 1,000 companies. It also has Medicaid and Medicare plans and provides service in health information technology, consulting, and pharmacy benefit management.

All that makes UnitedHealth the largest U.S. insurer by sales. Not even the new healthcare law has slowed it down. And given the company’s strong performance, you may want to consider its stock.

UnitedHealth's net income rose 13 percent to $1.35 billion in the first quarter from $1.19 billion a year earlier, topping forecasts. Revenue increased 9.7 percent to $25.43 billion, also exceeding expectations. The company benefited from rising enrollment in its plans and moderate healthcare spending by its customers.

Its membership totaled 38.7 million as of March 31, up 5.2 percent from a year earlier. Enrollment in its Medicare managed-care plans for the elderly and Medicaid plans for the poor gained 8.1 percent.

The new healthcare law requires managed-care companies to spend at least 80 percent of their premium revenue on medical care. UnitedHealth said it spent 81.4 percent on care in the first quarter, up just slightly from 81.3 percent a year earlier and well below analysts’ forecasts.

Healthier Earnings Ahead

The company raised its prediction for 2011 earnings to a range between $3.95 and $4.05 per share, up from its prior forecast of between $3.50 and $3.70.

"We expected upside to first-quarter results, but we are surprised by the magnitude," Goldman Sachs analyst Matthew Borsch wrote in a research note. He’s impressed with the UnitedHealth’s execution.

Of 17 analysts listed by Fidelity Investments, 10 have a buy or equivalent rating on UnitedHealth stock, and seven assign a neutral or equivalent rating.

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The healthcare industry faces an array of well-documented problems, ranging from rising costs to inadequate insurance coverage for many Americans. Despite the litany of woes, abundant profit opportunities exist for many companies in the sector. One of them is UnitedHealth...
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