UNH UnitedHealth Group Inc

By Charley Grant 

At a moment of uncertainty for health insurers, there appear to be few risks to UnitedHealth Group Inc.'s strong long-term performance.

The country's largest publicly traded health insurer by market value will report fourth-quarter results on Tuesday. Analyst consensus calls for sales of $47.4 billion and adjusted earnings per share of $2.07, according to FactSet. There shouldn't be too much drama in the headline numbers. UnitedHealth has lagged behind the earnings consensus just one time since the fourth quarter of 2011.

What UnitedHealth will say about its business prospects, and those of the industry, is far less certain. The report will come less than a week after the Senate took the first step toward a repeal of the Affordable Care Act. It is anyone's guess at this point just what would replace President Barack Obama's signature law should it eventually be scrapped.

Meanwhile, the industry is waiting to see whether two planned megamergers will close. The Justice Department has sued to block Aetna Inc.'s planned tie-up with Humana Inc., as well as Anthem Inc.'s proposed deal with Cigna Corp.

The good news for UnitedHealth investors is those issues shouldn't have much of a direct impact on the company's financial performance.

At last count, more than two-thirds of UnitedHealth's members came from employer groups, rather than through government programs such as Medicare and Medicaid. UnitedHealth has the smallest public exchange business of any major publicly traded insurer and has been scaling back its presence in that market since 2015. Meanwhile, the company hasn't eschewed acquisitions altogether; it recently announced a $2.3 billion purchase of Surgical Care Affiliates Inc., an outpatient surgery center company.

But that proposed transaction won't trigger the antitrust concerns or thorny integration issues that its rivals face.

Perhaps the biggest investment risk is the stock's long run of success. Its shares have more than tripled over the past five years and now trade at 17 times forward earnings. That is close to a 10-year high.

UnitedHealth's lofty valuation eventually could pose a problem for shareholders if years of robust business growth begins to stall. But that risk is, for now, a hypothetical one. Sales rose more than 11% in the third quarter from a year earlier.

Given that backdrop, the prospect of Tuesday's checkup shouldn't raise investors' blood pressure.

Write to Charley Grant at charles.grant@wsj.com

(END) Dow Jones Newswires

January 17, 2017 02:48 ET (07:48 GMT)

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