Yahoo Finance UnitedHealth Rises on Q1 Earnings Beat: ETFs to Gain
UnitedHealth Group UNH, the largest U.S. health insurer, reported better-than-expected first-quarter 2024 results as it breezed past the Zacks Consensus Estimate on both earnings and revenues. UNH shares climbed 5.2% on the day.
Investors can tap the opportunity by investing in ETFs having the largest allocation to this health insurance giant. These include iShares U.S. Healthcare Providers ETF IHF, Health Care Select Sector SPDR Fund XLV, iShares U.S. Healthcare ETF IYH, Fidelity MSCI Health Care Index ETF FHLC and Vanguard Health Care ETF VHT.
Earnings in Focus
Earnings per share came in at $6.91, topping the Zacks Consensus Estimate of $6.63 and increasing 10.4% from the year-ago quarter. Revenues grew 8.5% year over year to $99.8 billion and were above the estimated $99.25 billion. Its solid results were again powered by strong growth in Optum and UnitedHealthcare (see: all the Healthcare ETFs here).
Optum revenues increased 12.9% to $61.6 billion, led by Optum Health and Optum Rx, due to continued strong expansion in the number of people served. UnitedHealthcare revenues rose 7% year over year to $75.4 billion, reflecting growth in the number of people served domestically.
Medical ratio (a measure of the percentage of premiums paid out for medical services) deteriorated 210 bps year over year to 84.3%.
The health insurer affirmed its 2024 earnings per share guidance in the range of $27.50-$28.00, indicating 10.5% year-over-year growth at the mid-point. Notably, UnitedHealth is among the largest players in the Medicare Advantage market, where private insurers offer an alternative to the original Medicare — the federal government's health insurance plan for people aged 65 and older or those with certain disabilities.
ETFs in Focus
Let’s delve into each ETF below:
iShares U.S. Healthcare Providers ETF (IHF)
iShares U.S. Healthcare Providers ETF follows the Dow Jones U.S. Select Healthcare Providers Index with exposure to companies that provide health insurance, diagnostics and specialized treatment. The fund holds 67 securities in its basket. UNH occupies the top position with a 22.1% share.
iShares U.S. Healthcare Providers ETF has amassed $793.7 million in its asset base, while volume is light at about 109,000 shares per day, on average. It charges 40 bps in annual fees and has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook.
Health Care Select Sector SPDR Fund (XLV)
Health Care Select Sector SPDR Fund is the most popular healthcare ETF and follows the Health Care Select Sector Index. It holds 64 securities in its basket, with UnitedHealth taking the second spot at 8% of the assets. Pharma, healthcare equipment & supplies, and healthcare providers & services and take the largest share at 31.4%, 21% and 21% share, respectively, from a sector look (read: 4 Sector ETFs & Stocks to Benefit From Hot Inflation).
Health Care Select Sector SPDR Fund has AUM of $38.3 billion in its asset base and trades in a heavy volume of around 8 million shares. The expense ratio comes in at 0.09%. XLV has a Zacks ETF Rank #1 (Strong Buy) with a Medium risk outlook.
iShares U.S. Healthcare ETF (IYH)
iShares U.S. Healthcare ETF offers exposure to 113 U.S. healthcare equipment and services, pharmaceuticals, and biotechnology companies by tracking the Russell 1000 Health Care RIC 22.5/45 Capped Gross Index. Here again, UnitedHealth is the second firm, accounting for 7.8% of the total assets. In terms of industrial exposure, pharma takes the top spot at 31.6%, followed by healthcare equipment (20.3%) and biotech (16.8%).
iShares U.S. Healthcare ETF has amassed $3.3 billion in its asset base while charging 40 bps in annual fees. It trades in a good volume of around 259,000 shares a day and has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook.
Fidelity MSCI Health Care Index ETF (FHLC)
Fidelity MSCI Health Care Index ETF provides exposure to 368 healthcare stocks and tracks the MSCI USA IMI Health Care Index. UnitedHealth occupies the second position with 7.5% of assets. Pharma accounts for 28.6% share while healthcare providers and services, healthcare equipment and supplies, and biotech round off the top three spots with double-digit exposure each.
Fidelity MSCI Health Care Index ETF has AUM of $3 billion. Its expense ratio is 0.08%, while volume is good at 128,000 shares a day. FHLC has a Zacks ETF Rank #3 with a Medium risk outlook.
Vanguard Health Care ETF (VHT)
Vanguard Health Care ETF tracks the MSCI US Investable Market Health Care 25/50 Index and holds 412 stocks in its basket. Of these, UnitedHealth takes the second spot with a 7.3% allocation. Pharma takes the largest share at 28.7%, while healthcare equipment and biotech round off the top three spots (read: Time to Tap Healthcare ETFs on Nvidia's AI Ambition?).
Vanguard Health Care ETF is also one of the most popular and liquid ETFs, with AUM of $17 billion and an average daily volume of about 195,000 shares. It charges 10 bps in annual fees and has a Zacks ETF Rank #1 with a Medium risk outlook.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
UnitedHealth Group Incorporated (UNH) : Free Stock Analysis Report
Health Care Select Sector SPDR ETF (XLV): ETF Research Reports
iShares U.S. Healthcare ETF (IYH): ETF Research Reports
Vanguard Health Care ETF (VHT): ETF Research Reports
iShares U.S. Healthcare Providers ETF (IHF): ETF Research Reports
Fidelity MSCI Health Care Index ETF (FHLC): ETF Research Reports
