With each week seemingly adding a new brick to the wall of worry, UnitedHealth Group (UNH) offers investors some shelter from a potential economic storm, asserts Rich Moroney, editor of Dow Theory Forecasts.

Although the stock trades at a rich 25 times estimated 2022 earnings, UnitedHealth resides in the defensive managed-care industry and offers a long runway for steady operating growth.

Spending on health care appears poised to keep rising due to inflation, medical advancements, and demographic trends. The strong labor market should boost UnitedHealth’s near-term growth prospects, given that commercial plans account for 52% of its medical membership.

Its remaining medical members come from Medicare (21%), Medicaid (15%), and global operations (9%). Medical membership rose 5% last year to 50.6 million people. UnitedHealth pairs its managed-care business with various health services, huddled under the umbrella of the Optum brand.

Business breakdown

A behemoth in the healthcare industry, UnitedHealth generated $287.60 billion in sales last year, more than twice as much as Anthem (ANTM), its largest managed-care rival. UnitedHealth looks to get even bigger through a pair of pending deals. Last month the company agreed to pay $5.4 billion to acquire LHC Group (LHCG), which focuses on home-based health services.

Meanwhile, UnitedHealth’s bid to acquire Change HealthCare in a $7.84 billion deal first announced in January 2021 hinges on an antitrust trial, set to begin on August 1. But UnitedHealth isn’t solely dependent on acquisitions for growth.

Over the long haul, management expects annual per-share profits to climb at a clip of 13% to 16%. UnitedHealth generated solid operating growth in a challenging environment last year, as the temporary deferral of care was more than offset by coronavirus-related care and testing costs. The company increased earnings per share 13% in 2021, nearly doubling its industry average.


UnitedHealth sees pandemic-related costs dropping this year, as at-home coronavirus testing — a cheaper alternative to PCR tests and physician visits — is expected to become more prevalent and U.S. hospitalization rates hopefully keep falling.

For 2022, UnitedHealth targets earnings per share of $21.10 to $21.60, implying 11% to 14% growth. Management is notorious for providing conservative initial guidance, then raising it throughout the year. The company has topped the consensus profit estimate in 52 straight quarters. UnitedHealth is a Long-Term Buy.

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