NEW YORK (TheStreet) -- Shares of UnitedHealth Group (UNH) are up by 2.28% to $121.69 in mid-morning trading on Tuesday, after a report from The Wall Street Journal that said the company has contacted fellow health insurer Aetna (AET) in regards to a merger.
The deal may be valued at over $40 billion.
UnitedHealth broached the subject of a merger with Aetna in a letter, sources told The Journal, adding that it is unclear if Aetna has responded.
Several companies within the health insurance sector are looking to consolidate as the industry continues to change. Companies are seeking to capitalize on cost cuts and other benefits, The Journal noted.
Shares of Aetna are up by 3.66% to $125.44 this morning.
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 solid stock price performance, growth in earnings per share, increase in net income, revenue growth and notable return on equity. We feel its strengths outweigh the fact that the company shows low profit margins."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Powered by its strong earnings growth of 32.72% and other important driving factors, this stock has surged by 48.83% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, although almost any stock can fall in a broad market decline, UNH should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
- UNITEDHEALTH GROUP INC has improved earnings per share by 32.7% in the most recent quarter compared to the same quarter a year ago. 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 ($6.26 versus $5.70).
- The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the Health Care Providers & Services industry average. The net income increased by 28.6% when compared to the same quarter one year prior, rising from $1,099.00 million to $1,413.00 million.
- Despite its growing revenue, the company underperformed as compared with the industry average of 13.1%. Since the same quarter one year prior, revenues rose by 12.8%. Growth in the company's revenue appears to have helped boost the earnings per share.
- 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.
- You can view the full analysis from the report here: UNH Ratings Report