The health sector thrived during the COVID-19 pandemic and is expected to stay buoyed amid surging medical requirements worldwide. The global drug formulation market was valued at over $1.50 trillion in 2021 and is expected to grow at a CAGR of 5.6% from 2022 to 2032.
On top of it, the global health insurance market is expected to grow steadily due to rising awareness regarding the benefits of health insurance among consumers and the rising elderly population. The market is expected to hold around $3.79 trillion by 2030, growing at a CAGR of 6.8%.
Furthermore, healthcare companies face an inelastic demand for their products and services. Hence, it provides a way for investors to hedge against macroeconomic uncertainties and recessionary pressures.
Therefore, it could be wise to add fundamentally strong healthcare stocks, UnitedHealth Group Incorporated (UNH) and Humana Inc. (HUM), to your portfolio.
UnitedHealth Group Incorporated (UNH)
UNH is a diversified healthcare company. The company operates through four segments: Optum Health; OptumInsight; OptumRx; and UnitedHealthcare. It offers consumer-oriented health benefit plans and services, software and information products, health care coverage, and well-being services.
On November 16, UNH and Life Time Group Holdings, Inc. (LTH) announced an expansion of their relationship to include access to all Life Time locations. This is expected to help UNH deliver additional value to its customers, thereby driving brand equity and market expansion appreciation.
On November 4, UNH announced its quarterly dividend of $1.65 per share, which was payable to shareholders on December 13. This reflects the company’s cash generation ability.
For the fiscal third quarter ended September 30, UNH’s revenues increased 11.8% year-over-year to $80.89 billion. The company’s earnings from operations rose 30.6% from the year-ago value to $7.46 billion. In addition, its adjusted earnings attributable to UNH common shareholders came in at $5.49 billion and $5.79 per share, up 27.2% and 28.1% year-over-year, respectively.
Analysts expect UNH’s revenue for the fiscal fourth quarter ending December 2022 to come in at $82.52 billion, indicating an 11.9% year-over-year growth. Street expects the company’s EPS for the same quarter to grow 15.5% year-over-year to $5.17. The company surpassed the consensus EPS and revenue estimates in each of the trailing four quarters.
Over the past six months, UNH has gained 7.2% to close the last trading session at $531.31. It has gained 4.5% over the past three months.
UNH’s POWR Ratings reflect its fundamental strength. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
UNH has a B grade for Growth, Stability, Sentiment, and Quality. In the A-rated Medical – Health Insurance industry, it is ranked second out of 11 stocks.
Beyond what we’ve stated above, we have also given UNH grades for Value and Momentum. Get all UNH ratings here.
Humana Inc. (HUM)
HUM operates primarily as a health and well-being company through three segments: Retail; Group and Specialty; and Healthcare Services. The company provides medical and supplemental benefit plans.
On November 22, HUM announced the completion of its $1.25 billion public offering in aggregate principal amount of senior notes. The company expects net proceeds of approximately $1.23 billion from the offerings to repay its 2.900% Senior Notes due 2022 and its 3.150% Senior Notes due 2022 for general corporate purposes.
On October 27, HUM announced that its board of directors had declared a cash dividend to stockholders of $0.7875 per share, payable to stockholders on January 27, 2023. This reflects the company’s ability to pay its shareholders.
HUM’s adjusted revenues increased 9% year-over-year to $22.75 billion in the fiscal third quarter ended September 30. Its adjusted pretax income amounted to $1.14 billion, up 42.5% year-over-year. The company’s adjusted earnings per share came in at $6.88, registering an increase of 42.4% from the prior-year quarter.
Analysts expect HUM’s EPS to grow 21.2% year-over-year to $1.50 for its fiscal fourth quarter (ending December 2022). The $22.44 billion consensus revenue estimate for the same quarter represents a 6.6% year-over-year growth.
The company has an impressive earnings surprise history, as it has surpassed the consensus EPS estimates in each of the trailing four quarters.
HUM has gained 12.5% over the past six months and 6.5% over the past three months to close the last trading session at $513.96
HUM’s POWR Ratings reflect this positive outlook. The company has an overall A rating, which translates to a Strong Buy in our proprietary rating system.
HUM is rated B in Growth, Value, Sentiment, and Quality. Within the same industry, it is ranked #3.
To see additional POWR Ratings for Stability, and Momentum for HUM, click here.
UNH shares were trading at $534.66 per share on Tuesday afternoon, up $3.35 (+0.63%). Year-to-date, UNH has gained 7.84%, versus a -18.19% rise in the benchmark S&P 500 index during the same period.
About the Author: Sristi Suman Jayaswal
The stock market dynamics sparked Sristi's interest during her school days, which led her to become a financial journalist. Investing in undervalued stocks with solid long-term growth prospects is her preferred strategy. Having earned a master's degree in Accounting and Finance, Sristi hopes to deepen her investment research experience and better guide investors.
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