UnitedHealth Group's Robust Q2 Performance: Oppenheimer's View On Profit Increase And Revised FY23 Guidance

Oppenheimer analyst Michael Wiederhorn reiterated an Outperform rating on UnitedHealth Group UNH, with a price target of $610.

The company reported nearly $5.5 billion in Q2, up 8% Y/Y in profits as its health insurance plans and Optum medical provider businesses grew by "double-digit" percentages despite rising costs. 

Wiederhorn notes that the company's Optum business complements its core managed care operations and continues to account for a large share of earnings. However, the analyst adds that Optum Health was a slight underperformer in Q2. 

The analyst adds that UNH is seeing stabilization in utilization relative to the June commentary that pointed to a pickup in MA. Notably, UNH is not seeing any impact to comm'l/Medicaid, suppressing concerns in the marketplace.

Though the Q2 beat ($6.14 vs. OPCO/Street $5.96/$5.99E) was driven by investment income, trends appear stable, and management had enough confidence to raise the bottom-end of its FY2023 guidance range, the analyst notes. 

UnitedHealth revised its FY23 net earnings outlook, to $23.45-$23.75 per share and adjusted net earnings to $24.70-$25.00 per share (vs. consensus of $24.80), compared to prior guidance of $23.25-$23.75 per share and $24.50-$25.00 per share, respectively. 

The analyst believes that UNH is well positioned under its diversification, strong track record, elite management team, and exposure to certain higher-growth businesses. 

Post-Q2, Wiederhorn tweaked FY2023/2024/2025 EPS estimates to $24.90/$28.04/$31.58 from $24.85/$28.07/$31.94. 

Price Action: UNH shares are trading higher by 0.72% to $483.65 on the last check Monday.