UnitedHealth Group Post-earnings Analysis
Chart done on daily timeframe. UnitedHealth Group shares saw an influx of buyers following their recent quarterly earnings, helping the stock push to a new all time high; however the move is questionable considering their numbers weren’t as rosy as they seemed. Although UNH outperformed their profit forecasts, the company’s cyberattack crises is estimated to cost them billions of dollars over the next year. What was previously estimated to cost them $1.15-$1.35 per share in profits has been revised to $1.90-$2.15, a substantial and costly jump. UnitedHealth has always posted hefty profits, but those profits are now at risk because of their cyber mishap. Another headwind the company faces is an uptick of how much their insurers spend on claims, this number moved up 2%, which will also eat into their profitability.
The jump following the earnings report may be justified if we look at the company’s performance from a larger standpoint. Year over year, UNH has managed to grow its revenue from 257B in 2020 to a massive 371B to end last year. The substantial gain was also accompanied by bolstering profits that grew to 22B last year, all while growing their balance sheet and free cash flow. This has given the company the ability to boost its dividend and reward its investors, which is also helping sustain its stock’s price.
For now, markets seemed to have reacted positively despite the profit headwinds mentioned above, but as an investor I’d stay careful because this may be a knee-jerk reaction to earnings. Long term the company is a solid pick, but the short term may reverse when earnings are truly digested.