UnitedHealth Set to Post New Highs

Dow component UnitedHealth Group Inc. (UNH) is trading lower by nearly 1% in Thursday’s pre-market despite beating Q2 2021 top and bottom line estimates. America’s largest publicly-held health plan provider posted a profit of $4.70 per-share, beating expectations by $0.25, while revenue surged 14.8% year-over-year to $71.32 billion, nearly $2 billion higher than consensus. The company issued in-line fiscal year 2021 guidance, which includes a $1.80 per-share charge for COVID-19 impacts.

Looking Past the Pandemic

The pandemic sword cut both ways for insurance providers, skewing historical results. On the one hand, spiking infections and government mandates forced payments beyond what insurers had prognosticated on their actuarial tables. However, millions of folks deferred medical treatment at the same time, avoiding the waiting rooms that could expose them to the virus. These imbalances are now working out of the system, forcing carriers to readjust loss reserves.

UnitedHealth made headlines a few years ago when it pulled out of the U.S. Affordable Care Act a.k.a. Obamacare, subsequently avoiding volatility suffered by many rivals when President Donald Trump attempted to repeal the popular program. However, the company is now sitting at ground zero in the political debate over expanded Medicare and Medicare-for-all, with executives using media interviews to criticize government run health care programs.

Wall Street and Technical Outlook

Wall Street has been wildly bullish on UnitedHealth’s long-term outlook for years, maintaining a ‘Buy’ rating now based upon 21 ‘Buy’, 1 ‘Overweight’, 3 ‘Hold’, and 1 ‘Underweight’ recommendation. Price targets currently range from a low of $360 to a Street-high $522 while the stock is set to open Thursday’s session about $35 below the median $440 target. This placement suggests some investors are avoiding exposure due to continued pandemic anxiety.

UnitedHealth posted a new high at 306.71 in February 2020 and fell nearly 40% into March’s two-year low. The subsequent recovery wave reached the prior high in June, ahead of a November breakout that hit an all-time high at 425.98 in May. Buyers returned in June after a pullback to the 50-day moving average, yielding an uptick that’s now reached within 12 points of the 2021 peak. Accumulation has surged to a new high at the same time, setting the stage for a trend advance toward 470.

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Disclosure: the author held no positions in aforementioned securities at the time of publication.