UnitedHealth Group stock (NYSE: UNH) reported its Q2 results last week, with revenue and earnings comfortably above ours and the street estimates. UNH stock has rallied around 5% in a week, while it’s up 17% in a month. Despite the recent rise, we believe UNH stock has some more room for growth and may continue to see higher levels, as discussed below.
The company reported revenue of $80.3 billion (up 13% y-o-y) and EPS of $5.57 (up 19% y-o-y) in Q2, compared to our $79.9 billion and $5.25 consensus estimates, respectively. The revenue growth was led by Optum, which saw an 18% rise, while UnitedHealth segment sales were up 12%. The operating margins also expanded to 8.9%, vs. 8.5% in the prior-year quarter.
Based on solid results, the company raised its full-year earnings outlook. It now expects its adjusted EPS to be between $21.40 and $21.90, up from its previous guidance of the $21.20 and $21.70 range. Following the company’s recently announced Q2 results, we have revised UnitedHealth’s Valuation to be around $610 per share (vs. $550 earlier), which is 14% above the current market price of $533, implying that UNH stock has some more room for growth.
But what about the near term?
Now that UNH stock has seen a rise of 17% in a month, will it continue its upward trajectory, or is a fall imminent? Going by historical performance, there is a solid chance of a rise for UNH stock over the next month. A move of 17% in a month is uncommon for UNH, and it has occurred only 15 times in the past ten years. Of those 15 instances, 13 resulted in UNH stock rising over the subsequent one-month period (twenty-one trading days). This historical pattern reflects 13 out of 15, or about an 87% chance of a rise in UNH stock over the next month. See our analysis of UnitedHealth Stock Chance of Rise for more details.
Calculation of ‘Event Probability‘ and ‘Chance of Rise‘ using the last ten years’ data
- After moving 4% or more over five days, the stock rose on 54% of the occasions in the next five days.
- After moving 6% or more over ten days, the stock rose on 51% of the occasions in the next ten days.
- After moving 17% or more over a twenty-one-day period, the stock rose on 87% of the occasions in the next twenty-one days.
This pattern suggests a higher chance of a rise in UNH stock over the next five, ten, and twenty-one days.
UnitedHealth (UNH) Return (Recent) Comparison With Peers
- Five-Day Return: MOH highest at 6.9%; CI lowest at -1.7%
- Ten-Day Return: MOH highest at 9.5%; HCA lowest at 3.2%
- Twenty-One Day Return: MOH highest at 19.7%; HCA lowest at 3.9%
Furthermore, the Covid-19 crisis has created many pricing discontinuities which can offer attractive trading opportunities. For example, you’ll be surprised how counter-intuitive the stock valuation is for UnitedHealth Group vs. Commercial Metals.
Despite inflation rising and the Fed raising interest rates, among other factors, UNH stock has risen 6% this year. But can it drop from here? See how low UnitedHealth stock can go by comparing its decline in previous market crashes. Here is a performance summary of all stocks in previous market crashes.
|S&P 500 Return||4%||-17%||76%|
|Trefis Multi-Strategy Portfolio||7%||-17%||227%|
 Month-to-date and year-to-date as of 7/20/2022
 Cumulative total returns since the end of 2016