What’s driving UnitedHealth Group Inc (NYSE: UNH) stock

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UnitedHealth Group Inc (NYSE: UNH) stock rose 2.83% on January 15th, 2020 (Source: Google finance) and continued its bullish momentum rising over 1% on January 16th, 2020 (as of 10:00 am GMT-5; Source: Google finance). The company posted better than expected earnings in the latest quarter due to strength in its core business that sells health plans as well as its Optum segment, which includes its pharmacy benefits management unit. Net earnings attributable to shareholders rose to $3.54 billion in the three months ended Dec. 31, from $3.04 billion, a year earlier. UnitedHealth has grown due to its fastest growing Optum business with a string of small-scale acquisitions, the latest being a US$300 million purchase of Diplomat Pharmacy. Revenue from Optum, has posted the growth of about 8% to US$29.8 billion. Cash flows from operations of $18.5 billion, which is an increase of 18% over 2018 to 1.3 times net income, better than expected by the company, partly due to timing factors. For 2019, the return on equity of almost 26%. The company has ended the year 2019 with a debt to capital ratio of about 40%, even with over $10 billion of deployment for business combinations and capex, $5.5 billion in share repurchases and a 20% dividend increase.

Moreover, Medical reserves have developed favorably in the fourth quarter by $270 million, that also includes $150 million from 2019. The company had managed medical costs were well, which resulted in an 82.5% medical care ratio for full year 2019. In 2019, The company’s operating cost ratio was of 14.5% improved 50 basis points, which reflects 60 basis points of operating cost productivity and the deferral of the health insurance tax, partially offset by the effect of business mix changes and continued investments in innovation, service, and growth.

UNH in the fourth quarter of 2019 has reported the adjusted earnings per share of $3.90, beating the analysts’ estimates for the adjusted earnings per share of $3.78. The company had reported the adjusted revenue growth of 4.2 percent to $60.90 billion in the fourth quarter of 2019, which is in line with the analysts’ estimates for revenue of $60.90 billion.

The company has affirmed its full-year outlook for 2020, and expects adjusted earnings to be in the range of US$16.25 to US$16.55 per share. The company expects 47% to 48% of full year earnings per share to be realized in the first half of the year. For full year 2020, the company continues to expect revenues to be approximately $262 billion.

 

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