Shares of healthcare company UnitedHealth (UNH) closed down in today’s trading as investors await its Q1 earnings results on April 17 before the market opens. Analysts are expecting earnings per share to come in at $7.29 on revenue of $111.58 billion. This equates to 5.5% and 11.8% year-over-year increases, respectively, according to TipRanks’ data.
Ideally, earnings per share should grow faster than revenue as that would demonstrate a high degree of operating and financial leverage in the business. Nevertheless, it is worth noting that UNH has beaten earnings estimates every quarter since at least its 2021 Q2. Therefore, it is still possible that EPS growth will outpace revenue growth.
It is also likely that its winning streak will continue. Indeed, Truist has increased its price target on UnitedHealth from $610 to $660 while maintaining a Buy rating, according to a new research note ahead of its Q1 earnings. The firm believes that the sector is in a strong position, thanks to its large scale, mostly domestic focus, strong free cash flow, and defensive characteristics. Although regulatory changes remain something to watch, Truist said that conditions in the sector are improving.
Optum Health-Adjusted Scripts Have Been Trending Higher
This optimism is further supported by the chart below from Main Street Data, which shows a steady upward trend in Optum Health-Adjusted Scripts from Q1 2020 to Q4 2024. This is a metric used by UnitedHealth Group’s Optum segment (specifically OptumRx or Optum Health) to track prescription activity, but with adjustments made to better reflect the complexity, value, or type of services provided.
As of Q4 2024, adjusted scripts reached 422 million – a 24% total increase over the period and a 5% compound annual growth rate. While there was a slight dip in 2020, possibly due to the pandemic’s impact, volumes began recovering in 2021 and grew more noticeably through 2022–2024.
Options Traders Anticipate a Large Move
Using TipRanks’ Options tool, we can see what options traders are expecting from the stock immediately after its earnings report. The expected earnings move is determined by calculating the at-the-money straddle of the options closest to expiration after the earnings announcement. If this sounds complicated, don’t worry, the Options tool does this for you. Indeed, it currently says that options traders are expecting a 4.6% move in either direction.
What Is the Future of UNH Stock?
Overall, analysts have a Strong Buy consensus rating on UNH stock based on 21 Buys and one Hold assigned in the past three months. Furthermore, the average UNH price target of $636.58 per share implies 9.5% upside potential.
