UnitedHealth Group - Value

UnitedHealth Group (UNH), which provides health insurance to about 75 million people, is trading at just 9.8x forward estimates even though its shares are at a 52-week high.

The healthcare stocks are finally making a move after a year or more of uncertainty tied to healthcare reform.

UnitedHealth Group Surprised By 32% in the Second Quarter

UnitedHealth Group has been putting together a nice steak of earnings surprises including the last 4 quarters by an average of 27.5%.

On July 20, it reported its second quarter results that beat by 24 cents. Earnings per share were 99 cents compared to the Zacks Consensus of just 75 cents.

All of its business units saw revenue increases or number of people increases in the quarter. Total revenue rose 7% to $23.3 billion.

Guidance Raised

When I last reviewed the company in April, it was looking for full year earnings per share between $3.15 and $3.35. But with the strong second quarter, it raised that range to $3.40 to $3.60.

Consequently, the analysts revised their estimates upward as well which pushed the 2010 Zacks Consensus to $3.60 per share in the last 60 days. That is at the very upper end of the guidance range.

Analysts expect earnings per share growth of 11.2% but are more cautious on 2011 as earnings are expected to decline by 2.4%.

UnitedHealth Group will report third quarter results on Oct 19.

Is It Still a Value Stock?

UnitedHealth Group was trading at 9.3x forward estimates back in April so it is slightly more expensive now, but still in line with its peer group at 9.7x.

The company sports a PEG ratio of 0.9 and a price-to-book ratio of 1.6. Both are well within value parameters.

Unitedhealth Group is now a Zacks #2 Rank (buy) stock. You can see the recent rally in the shares in the 2-year chart below.

Read the April 27, 2010 article.

Update to Previous Value Zacks Rank Buy Stocks

Worthington Industries (WOR) has surprised on the Zacks Consensus Estimate 3 out of the last 4 quarters by an average of 91% as the global recession has eased. Read the full article.

Ultra Clean Holdings (UCTT) has put together a strong surprise streak, having beaten the Zacks Consensus the last 5 quarters. Read the full article.

Avnet Inc. (AVT) is trading at just 7.5x forward estimates as the technology recovery rolls on. Read the full article.

Westlake Chemical Corporation (WLK) saw sales jump 42% in the second quarter as the global recovery continued. Read the full article.

Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor in charge of the market-beating Zacks Value Trader service. You can follow her at twitter.com/traceyryniec.

 
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