Beat-and-Raise Boosts UnitedHealth Stock

Cantor Fitzgerald called UNH's guidance "notable"

Apr 16, 2019 at 10:22 AM
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UnitedHealth Group Inc (NYSE:UNH) stock is near the top of the Dow this morning, after the largest U.S. health insurer reported stronger-than-expected adjusted first-quarter profit of $3.73 per share and revenue of $60.31 billion. UNH also boosted its full-year profit forecast, thanks to higher prescription volumes at its pharmacy benefits business.

Early analyst reaction has been mostly upbeat. Cantor Fitzgerald reiterated its "overweight" rating and $310 price target, calling UnitedHealth's upwardly revised forecast "notable," considering the company "has historically been conservative in adjusting guidance early in the year." Evercore ISI, meanwhile, said UNH's fundamentals are strong, but questioned "whether any rebound in the shares can be sustained amid the political overhang that has plagued the managed care group."

In fact, concerns over potential legislative action against the sector -- including a possible change to the drug-rebate system -- sent UNH stock tumbling 10.3% last week. The shares bottomed at an annual low of $220.82 on Friday, but have since bounced 7.4% -- including today's 3.1% gain to trade at $237.23. Year-to-date, the equity is down 4.7%.

UNH options volume is running out out of the gate, with 14,200 calls and 4,850 puts on the tape already, compared to an average daily volume of 18,000 contracts. The June 260 call is most active, while new positions are being initiated at the April 235 call.

Meanwhile, in the wake of earnings, short-term implied volatilities have imploded. Most recently, UNH stock's 30-day implied volatility had plunged 15.9% to 28.2%, though this still registers in the 92nd annual percentile.


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