UnitedHealth (UNH) Stock Gains as Healthcare Sector Recovers Earlier Losses

UnitedHealth (UNH) stock is increasing in mid-afternoon trading on Friday, after the healthcare company said it was considering dropping out of the Affordable Care Act.
By Amanda Albright ,

NEW YORK (TheStreet) -- UnitedHealth Group  (HCA) - Get Report  stock is gaining 2.40% to $113.28 in mid-afternoon trading on Friday, after two healthcare companies assured investors that the Affordable Care Act was not hurting their businesses.

Healthcare stocks declined yesterday after the Hopkins, MN-based healthcare provider said it expects as much as $500 million in losses on the exchange plans in 2016, Bloomberg reports.

Additionally, UnitedHealth said it was considering dropping out of Obamacare's exchanges.

Insurers Aetna (AET) and Anthem (ANTM) both issued statements today that said their businesses have performed in-line with expectations,. 

"Anthem remains committed to enhancing access to high quality, affordable healthcare for all of our members inside and outside of the insurance exchanges and continuing our dialogue with policymakers and regulators regarding how we can improve the stability of the individual market," Anthem CEO Joseph Swedish said in a statement.

Healthcare stocks such as Aetna, Anthem, and Humana (HUM) were increasing in mid-afternoon trading on Friday. 

Separately, TheStreet Ratings team rates UNITEDHEALTH GROUP INC as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:

We rate UNITEDHEALTH GROUP INC (UNH) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, notable return on equity, solid stock price performance and growth in earnings per share. We feel its strengths outweigh the fact that the company shows weak operating cash flow.

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth came in higher than the industry average of 10.2%. Since the same quarter one year prior, revenues rose by 26.6%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • The stock has not only risen over the past year, it has done so at a faster pace than the S&P 500, reflecting the earnings growth and other positive factors similar to those we have cited here. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Health Care Providers & Services industry and the overall market, UNITEDHEALTH GROUP INC's return on equity exceeds that of both the industry average and the S&P 500.
  • UNITEDHEALTH GROUP INC's earnings per share improvement from the most recent quarter was slightly positive. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, UNITEDHEALTH GROUP INC increased its bottom line by earning $5.70 versus $5.50 in the prior year. This year, the market expects an improvement in earnings ($6.30 versus $5.70).
  • The change in net income from the same quarter one year ago has exceeded that of the S&P 500, but is less than that of the Health Care Providers & Services industry average. The net income has decreased by 0.3% when compared to the same quarter one year ago, dropping from $1,602.00 million to $1,597.00 million.
  • You can view the full analysis from the report here: UNH

Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of Jim Cramer, TheStreet or any of its contributors.

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