• In 2023, UnitedHealth reported impressive financials, with over $47 billion in revenue and 13% growth in adjusted earnings per share, showcasing robust performance.
  • Operating across diverse segments, including Optum Health and UnitedHealthcare, the company added over 1.7 million consumers and 900,000 patients under value-based care, emphasizing growth potential.
  • UnitedHealth strategically focuses on value-based care, with Optum Health serving over 4 million patients in fully accountable arrangements and plans to add 750,000 more, highlighting a forward-thinking approach.
  • The company invests heavily in digital transformation and AI integration, aiming for operational excellence, innovation, and enhanced consumer experiences in healthcare.

UnitedHealth (NYSE: UNH) boasts decisive financial performances, diverse business maneuvers, and a commitment to reshaping the industry. Read more to dissect the forces steering UnitedHealth's growth trajectory. The article explores the 2023 financial performance and key fundamentals. 

Source: unitedhealthgroup.com

Fundamental Strengths of UnitedHealth Supporting Rapid Growth Potential

Robust Financial Performance in 2023:

In 2023, UnitedHealth demonstrated impressive financial performance, reporting revenue growth of over $47 billion and an adjusted earnings per share growth of over 13%. The company's total revenue for the year reached $372 billion, showcasing a substantial increase of over 14%. These robust financial figures serve as a fundamental strength, indicating the company's ability to generate substantial revenue and profit.

Diverse and Expanding Business Segments:

UnitedHealth operates across various business segments, including Optum Health, UnitedHealthcare, Optum Rx, Optum Financial, and Optum Insights. Each segment plays a crucial role in the company's overall growth strategy. Optum Health, for instance, experienced a growth of 900,000 more patients under value-based care in 2023, while UnitedHealthcare added over 1.7 million new consumers in its Medicare and commercial offerings. The diversity and expansion within these segments contribute to the company's resilience and growth potential.

Strategic Focus on Value-Based Care:

UnitedHealth has strategically positioned itself in the evolving healthcare landscape by emphasizing value-based care. Value-based care arrangements empower physicians to provide more connected, coordinated, and comprehensive care, aligning incentives among consumers, care providers, and health plans. By the end of 2023, Optum Health served more than 4 million patients in fully accountable value-based arrangements. The commitment to further growth in value-based care, with plans to serve an additional 750,000 patients, demonstrates the company's forward-thinking approach to healthcare delivery.

Expanding Consumer Focus and Market Presence:

The company is actively working to enhance the consumer experience in healthcare. UnitedHealthcare's commercial benefits business, focused on large employers, experienced strong growth during the most recent selling season. The goal is to become the trusted source for healthcare information and advice, offering adaptable benefits that meet the unique needs of consumers. With a significant presence in Medicare Advantage and plans to add 450,000 to 550,000 consumers in the coming years, UnitedHealth is strategically positioning itself to cater to the diverse needs of healthcare consumers.

Digital Transformation and AI Integration:

UnitedHealth is heavily investing in digital engagement and using artificial intelligence (AI) to enhance efficiency. The UHC mobile app consistently ranks high in app stores, with over 100% year-over-year increase in mobile app installs. The implementation of AI and advanced technology is evident in various aspects, including responding to consumer inquiries, updating provider directories, and summarizing interactions with customers. The company's focus on removing repetitive tasks and leveraging technology to reduce administrative costs demonstrates a commitment to innovation and operational excellence.

Strategic Investments in Optum Segments:

Optum, UnitedHealth's health services platform, witnessed significant growth across its segments. Optum Health, Optum Rx, and Optum Insights experienced substantial increases in patients served, prescriptions managed, and electronic transactions facilitated, respectively. The robust performance of these segments, coupled with continuous investments in digital capabilities, positions UnitedHealth as a leader in the healthcare industry.

Financial Discipline and Capital Allocation:

The company's financial discipline is evident in its approach to resource management. Despite the sale of its operations in Brazil, UnitedHealth remains focused on optimizing the use of time and capital to deliver value to shareholders. The deployment of over $10 billion in growth capital and the return of nearly $15 billion to shareholders through share repurchase and dividends highlight the company's commitment to effective capital allocation.

Positive Outlook and Long-Term Growth Commitments:

UnitedHealth's leadership expressed confidence in the company's outlook for 2024 and beyond. The commitment to a long-term adjusted earnings per share growth rate of 13% to 16% demonstrates a strong belief in sustained growth. The strategic initiatives, including value-based care expansion, consumer-focused innovations, and digital capabilities enhancement, align with the company's vision for a simpler and more consumer-friendly health system.

UNH Stock Technical Take

Source: tradingview.com

The UNH stock price may hit $657 by the end of 2024. Currently, the stock is experiencing a downtrend. It can be observed in the moving average convergence/divergence (MACD) indicator. Here, the MACD line (black line) is moving below the signal line (maroon line). On the downtrend, $482 serves as a critical level for the price to take support and reverse to follow an upward trajectory. The same can be monitored through the RSI (relative strength index) at 40 approaching 30, which indicates an oversold state of the stock.

To confirm a bullish trend, the stock has to provide a proper close above the upper bond of the current consolidation at $558. On the upside, $597 may serve as a critical resistance for the price before reaching the 2024 target at $657. These levels are derived from the Fibonacci retracement and current momentum.

On the downside, $448 serves as a short-term support level. Whereas $388 emerged as mid-term support.

Fundamental Weakness: Modest Market Presence and Limited Revenue Base

Despite the strong growth in Optum Health's value-based care,  the market presence is still quite modest, serving only 4 million patients, which is a small fraction of the potential beneficiaries. Furthermore, the total Optum Health revenue base, representing only 2% of the $5 trillion U.S. Healthcare System spend, indicates a considerable distance to achieve broad positive system-wide impact.

While the growth in value-based care is commendable, serving 4 million patients is a relatively small portion of the population. This limitation in reach suggests that UnitedHealth may not be tapping into the full potential of value-based care models to impact a broader segment of the population.

Lastly, the fact that Optum Health's revenue base constitutes only 2% of the total U.S. Healthcare System spend indicates a narrow revenue stream in proportion to the overall market size. This can be seen as a weakness, especially if the company aims for substantial revenue growth in the future.

In conclusion, UnitedHealth's convergence of financial acumen, strategic agility, and technological progress holds potential. Despite the current stock downtrend, anchored at $482, the company's robust financials, diverse business segments, and strategic focus on value-based care suggest upside. While the stock faces resistance at $558, a breach could pave the way to the 2024 target at $657. However, amid the triumphs lie challenges—modest market presence and a limited revenue base in Optum Health.

*Disclaimer: The content of this article is for learning purposes only and does not represent the official position of VSTAR, nor can it be used as investment advice.