AET Aetna Inc. (delisted)

The U.S. Department of Defense (DoD) will invite fresh bids for the TRICARE West Region contract after UnitedHealthcare’s Military & Veterans business raised an objection. UnitedHealth Group Inc. (UNH) will get another chance to win the  $17 billion contract to provide health benefits to soldiers in 21 western states, including Minnesota.

In 2009, UnitedHealth lost the six-year contract to Triwest Alliance.

Lately, in March, UnitedHealth raised an objection over the Tricare contract it had initially won but was later awarded to its competitor Humana Inc (HUM). Initially, UnitedHealth won the Tricare contract in July 2009. But after continuous protests by Humana, the DoD reviewed their decision and awarded the $23.5 billion 5-year contract to Humana.

The two contracts combined would are worth more than $40 billion over six years, including handsome management fees.

United Health reported fourth quarter 2010 core operating earnings of $0.94 per share, $0.04 ahead of the Zacks Consensus Estimate and $0.13 ahead of the prior-year quarter. Results were aided by strong performance in the Health Benefits segment as well as Health Services segment.

In its earnings conference call, the company guided its 2011 revenues to gross $100 billion, and earnings in the range of $3.50 to $3.70 per share. We expect the contract wins will help the company achieve its guidance.

The Zacks Consensus Estimate for first-quarter 2011 is 88 cents per share. For full years 2011 and 2012, the Zacks Consensus Estimates are, respectively, $3.78 per share and $4.22 per share.

We maintain a Neutral recommendation on UnitedHealth Group over the long term. The quantitative Zacks #3 Rank (short-term Hold rating) for the company indicates no clear directional pressure on the stock over the near term.

Minnesota-based UnitedHealth Group Inc., through its diversified businesses, leverages core competencies in advanced technology-based transactional capabilities; health care data, knowledge and information; and health care resource organization and care facilitation to improve access to health and well-being services, simplify the medical experience, promote quality and make health care more affordable. It competes with Aetna Inc. (AET) and WellPoint Inc. (WLP).

 
AETNA INC-NEW (AET): Free Stock Analysis Report
 
HUMANA INC NEW (HUM): Free Stock Analysis Report
 
UNITEDHEALTH GP (UNH): Free Stock Analysis Report
 
WELLPOINT INC (WLP): Free Stock Analysis Report
 
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