UnitedHealth Closes Out Strong 2021
The group's shares continue to look moderately rich to us.
UnitedHealth Group UNH closed out 2021 strong with slightly better bottom-line results than our expectations, and management maintained the 2022 guidance initially given at its November investor day, including for the important Medicare Advantage end market. With our expectations roughly in line with 2022 guidance, especially on a cash flow basis, we anticipate maintaining our fair value estimate for UnitedHealth. The group's shares continue to look moderately rich to us, especially relative to MCO peers that have similar growth prospects but trade at lower multiples. Like its peers, UnitedHealth's economic moat remains narrow, which recognizes its top-tier position in medical insurance, pharmacy benefits, caregiving services, and analytical tools offset by long-term policy risks.
In the quarter, UnitedHealth delivered strong top- and bottom-line results. Revenue grew 13% to $73.7 billion with low-double-digit growth from its medical insurance operations and midteens growth from its Optum businesses. In medical insurance, total medical membership grew 5% year over year with government-sponsored programs (10% growth) offsetting continued weakness in employer-sponsored plans (1% growth). The Optum franchises were led by OptumHealth (33% revenue growth), as its local physician network grew organically and inorganically and those providers continued to transition to value-based arrangements, which is helping boost revenue per member significantly on just low-single-digit consumer growth. OptumInsight (12% revenue growth) and OptumRx (7% revenue growth) performed solidly, too. With those strong results, management turned in better adjusted EPS ($4.48) than FactSet consensus ($4.30) in the quarter. However, management merely maintained its guidance for 2022, and our expectations for 2022 appear roughly in line with management's outlook, including between $21.10 and $21.60 of adjusted EPS and $23 billion to $24 billion of operating cash flow.
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