UnitedHealth Group (NYSE: UNH) is scheduled to report its Q4 2022 results on Friday, January 13. We expect UnitedHealth to post revenue slightly below, but earnings to align with the street expectations. The company will likely continue to benefit from the increased contribution of the Optum Health business, while its private health insurance and pharmacy management businesses should see steady growth. Not only do we expect the company to navigate well over the latest quarter, our forecast indicates that UNH stock is undervalued, as discussed below. Our interactive dashboard analysis of UnitedHealth’s Earnings Preview has additional details.
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(1) Revenues expected to be slightly below the consensus estimates
- Trefis estimates UnitedHealth’s Q4 2022 net revenues to be around $82.2 billion, reflecting an 11.5% y-o-y growth and slightly below the $82.6 billion consensus estimate.
- The pharmacy management and health insurance businesses are expected to see steady sales growth.
- Optum Health, which provides care through local medical groups, has seen substantial growth over the recent quarters, a trend expected to continue in the near term.
- For the nine months ending Sep 2022, Optum Health sales were up a solid 33.4% y-o-y to $52.7 billion.
- The strong growth in the Optum Health business can be attributed to a rise in the number of patients served under the company’s value-based arrangements, including at-home services.
- Our dashboard on UnitedHealth Group Revenues has more details on the company’s segments.
- Looking at Q3 2022, UnitedHealth reported a 12% rise in total revenue, led by double-digit gains for both UnitedHealth and Optum segments.
(2) EPS likely to align with the consensus estimates
- UnitedHealth’s Q4 2022 adjusted earnings per share (EPS) is expected to be $5.18 per Trefis analysis, in line with the consensus estimate of $5.17.
- UnitedHealth’s adjusted net income of $5.5 billion in Q3 2022 reflected a 27.2% rise from its $4.3 billion figure in the prior-year quarter, led by 12% sales growth and a 130 bps rise in operating margin to 9.2%. Our dashboard on UnitedHealth’s Operating Income has more details.
- For the full-year 2023, we expect the adjusted EPS to be higher at $24.90 compared to the EPS of $19.02 in 2021 and an estimated $22.03 in 2022.
(3) UNH Stock Is Undervalued
- We estimate UnitedHealth Group’s Valuation to be around $611 per share, reflecting a 26% upside from the current market price of $486.
- At its current levels, UNH stock is trading under 20x forward expected earnings of $24.90, aligning with the average of 20x seen over the last three years. However, we believe UNH deserves a higher multiple, given the double-digit earnings growth seen over the recent years, a trend expected to continue in the near term.
Furthermore, the Covid-19 crisis has created many pricing discontinuities which can offer attractive trading opportunities. For example, you’ll be surprised at how counter-intuitive the stock valuation is for Stryker vs. UnitedHealth Group.
|S&P 500 Return||2%||2%||75%|
|Trefis Multi-Strategy Portfolio||5%||5%||229%|
 Month-to-date and year-to-date as of 1/11/2023
 Cumulative total returns since the end of 2016