UnitedHealth Group Inc. (UNH) is getting a clean bill of health from the market after its quarterly checkup.
Shares of the Minnetonka, Minnesota-headquartered healthcare giant were up about 3% in pre-market trading on Tuesday after UnitedHealth reported adjusted earnings per share of $3.73 for the first quarter, beating the Wall Street EPS consensus by $0.13; UnitedHealth also posted revenue that beat estimates by nearly $600 million.
"Given the recent market pressure related to political headlines...we believe today's results reinforce strong underlying fundamentals and will be well received by investors," Barclays analyst Steve Valiquette said.
UnitedHealth also raised its full-year adjusted net earnings forecast to a range of $14.50 to $14.75 a share from its previous range of $14.40 to $14.70. Analysts polled by FactSet had anticipated full-year earnings of $14.65 a share.
The earnings beat and improved outlook are encouraging analysts who believe the stock has largely battled back from the bad news that has kept UnitedHealth shares in the red so far in 2019.
"We see UNH as past the point of significant downside risk from market share gains in risk-based products," BMO Capital Markets analyst Matt Borsch said. "By showing strong earnings growth, UNH reveals a material degree of cost-competitive advantage over major rivals. UNH looks very well positioned for a long run of growth in a post-ACA environment, in our view."
Revenue from the company's Optum pharmacy benefit management segment was a particular positive, rising 11.9% from the first quarter of 2018. Analysts have locked in on the segment as the key growth segment for UnitedHealth in 2019.
"UNH is unique within our coverage universe given its Optum segment, which accounted for 47% of consolidated operating profit in 2018. We expect continued strong growth at Optum," Canto Fitzgerald analyst Steven Halper said on Tuesday morning. "UNH should be a core holding in all large-cap growth portfolios."
To be sure, the Optum segment also has been the biggest driver of headline risks restraining the stock.
Just last week the company was called in front of the Senate Finance Committee alongside many of its peers, coming under bipartisan scrutiny for the role of pharmacy benefit managers (PBMs) in drug pricing.
"Despite this vast influence over what often amounts to life and death, many consumers have very little insight into the workings of PBMs," Sen. Chuck Grassley, chairman of the committee, said in his opening statement one week ago.
"It sure looks to me like you all are taking deliberate actions to pad your bottom line at the expense of patients," Grassley said later in the hearing.
The scathing critique led to a large slide in the share price of many benefit managers and could take a great deal of steam out of the Optum growth story, especially if the Trump administration's proposal to cut rebates paid to benefit managers is passed.
Jim Cramer's Action Alerts PLUS team, which holds UNH stock in its portfolio, remained confident in CEO David Wichmann's ability to restore confidence in United Health amid the political commotion.
"If CEO David Wichmann provides commentary similar to what he has done in the past, a calming effect on investor's nerves should follow," the team said. "Although the headline and regulatory risks are palpable, what has not changed are the current-year fundamentals and the company is expected to deliver roughly 18% earnings per share growth in the first quarter."
The call kicked off at 8:45 a.m. ET and will be webcast here.