Is Unitedhealth Looking at a Healthy 2013?


2012 is not quite over yet, but it's never too early to get started thinking about the new year. While we'll all make resolutions we'll quickly forget, taking a look at how companies are poised to perform next year could make 2013 your portfolio's greatest year yet.

Insurance giant UnitedHealth Group had an exciting 2012, becoming the newest member of the Dow Jones Industrial Average earlier in the year. While its stock hasn't risen incredibly, UnitedHealth faces plenty of questions going into 2013. Will this insurer stumble over the hurdles that lie ahead of the industry at large, or is it poised to beat expectations and champion your portfolio?

The numbers game
On the purely financial side, UnitedHealth has presented an optimistic picture of 2013 revenue. The company expects revenue to finish between $123 billion and $124 billion for the full year, exceeding analyst expectations of about $119 billion. The company's goal would provide growth of more than 11% over 2012's full-year estimate of around $109.9 billion.

UnitedHealth only projects earnings of $5.25 to $5.50 per share in 2013, which is below analyst projections but still an improvement over this year's guidance. The average analyst price target on the stock is around $67 per share -- a number that would no doubt make investors happy, representing an appreciation of more than 20% over Thursday's closing price.

That's a lofty target, given the stock's 2012 performance, which has provided growth of 7.7% -- a strong number, but a far cry from 20%. While that may be optimistic, Unitedhealth does have a lot going for it as it heads into the new year.

Domestic and foreign expansion
UnitedHealth's international expansion is a huge selling point going forward. The company purchased Brazilian health care colossus Amil earlier in 2012 for $4.9 billion. It's a steep cost to pay, but opening up the fastest-growing private health care market in the Americas is more than worth it. Amil is already Brazil's largest health care provider, having recorded more than $4 billion in 2011 revenue. If Unitedhealth can tap into the nation's underdeveloped market, the deal could be a windfall for shareholders in 2013.

Further, UnitedHealth already operates in joint ventures in India, the Middle East, and Portugal. And while Portugal is being crushed by the European fiscal crisis, India's growing economy and massive population make it a great location to establish a major presence.

The company has also managed to grow membership more than other large competitors such as Aetna and Wellpoint . In a business where membership size matters, Unitedhealth has positioned itself well to remain the nation's largest provider with more than 45 million memberships across America. The company has boosted premium revenue by nearly 7.5% through the first nine months of 2012. Continuing that trend will go a long way toward meeting those aforementioned revenue estimates.

UnitedHealth's push to grow its Optum businesss -- supporting branches that provide prescription drug processing, consulting services, and more -- further diversifies it from its competition. The company's growth in these segments will give an extra boost to the bottom line in 2013, when industrywide obstacles could knock every insurer.

Fiscal cliff and ACA concerns
It's no secret that the fiscal cliff will hurt health care insurers
greatly if the country fails to avert it. Medicare plan providers such as Unitedhealth and Humana could take an especially big hit: The White House's Office of Management and Budget expects that the fiscal cliff's reduction of Medicare outlays would hit the industry to the tune of about $11 billion.

UnitedHealth can't do anything about that. But what it can make money from is the Affordable Care Act's projected influx of health insurance consumers. The ACA won't have a giant impact next year, but UnitedHealth could begin to see a trickle of customers securing health insurance before the big wave arrives in the following years. While the ACA will apply limits on insurance premiums and prevent insurers from restricting pre-existing conditions, UnitedHealth's bevy of new consumers should help to offset those disadvantages.

After all, this is an industry where size matters.

On the right track
While it's debatable whether or not UnitedHealth will manage to hit that $67 mark analysts predict, America's largest health insurer has many advantages going forward. Its substantial membership base, predicted to grow with the Affordable Care Act's mandate and Medicare's expansion, will fortify the company's revenue going forward. Its expansionary moves abroad provide access to underdeveloped, growing economies and populations looking for health care in developing societies. While UnitedHealth will undoubtedly take a hit if the fiscal cliff passes, this company has solidified its place as the pre-eminent health insurer in America -- and it's on the right path to meeting all expectations in 2013.

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