Healthcare technology and insurance company Clover Health Investments, Corp. (CLOV) went public on January 8, 2021, after merging with Social Capital Hedosophia Holdings Corp III (IPOC), a special-purpose acquisition company (SPAC) backed by the venture capitalist Chamath Palihapitiya. However, on February 4, Hindenburg Research published a report revealing that CLOV didn’t disclose of it being under an active investigation by the U.S. Department of Justice for issues including deceptive sales practices and undisclosed third-party deals, before the merger.
Such negativity surrounding CLOV and high short interest in the stock attracted the attention of the subreddit WallStreetBets. A lot of discussion on the stock on the online forum and consequent action of retail traders made the stock skyrocket lately. This meme stock hit its 52-week high of $28.85 on June 9. While the stock gained 84.2% over the past month and closed yesterday’s trading session at $12.56, Wall Street analysts expect the stock to hit $9.67 in the near term, indicating a potential downside of 23%. This reflects analysts’ concerns over its poor financials and illegal practices. Therefore, we believe the stock is best avoided now.
However, the health insurance industry has witnessed a huge number of customers taking policies upon pandemic-driven awareness. Many health insurers have upgraded their policies with various premium options, attractive reimbursement policies, adding coverage of various diseases into plans, and favorable contracts with healthcare providers to capitalize on the growing demand. Moreover, the Affordable Care Act backed by the Biden administration in ensuring lower healthcare costs and expanded insurance coverage makes the prospects bright for the industry. The global health insurance market is expected to grow at a 5.5% CAGR over the next seven years to reach $3.04 trillion by 2028.
Given this backdrop, we believe it is wise to invest in fundamentally sound health insurance stocks UnitedHealth Group Inc. (UNH), Anthem, Inc. (ANTM), Cigna Corporation (CI), and Humana Inc. (HUM) that have the potential to outperform CLOV in the near term, given their impressive collaborations with popular companies.
UnitedHealth Group Inc. (UNH)
UNH operates as a diversified health care and insurance company in the United States. The company offers a broad spectrum of products and services through two distinct platforms: UnitedHealthcare, which provides health care coverage and benefits services; and Optum, which provides information and technology-enabled health services. It provides employers with products and resources to plan and administer employee benefit programs.
UNH’s Optum segment and Bassett Healthcare Network announced a strategic collaboration on May 25, 2021, where Optum will provide a broad scope of services to Bassett, including revenue cycle management, an extensive set of advanced data and analytic capabilities, and information technology to advance quality care and patient experience in Central York. Giving Bassett the clinical and operational capabilities and financial resiliency to meet the evolving needs of residents, both companies are looking forward to a long-term partnership in providing advanced health care services.
On May 20, USMD, a physician-led integrated health care organization under UNH’s Optum segment, opened three new cancer care and infusion centers to improve cancer care for patients in the Dallas-Fort Worth Metroplex. With two additional centers scheduled to open in June, these centers will provide advanced precision medicine and coordinated care to support patients from diagnosis to treatment and survivorship.
UNH's revenue for its fiscal first quarter, which ended March 31, 2021, increased 9% year-over-year to $70.20 billion. The company’s earnings from operations came in at $6.74 billion, up more than 34.9% from the prior year period. While its adjusted net income increased 42% year-over-year to $5.09 billion, its adjusted EPS increased 42.7% year-over-year to $5.31. The company had cash and cash equivalents of $20 billion, as of March 31, 2021.
The consensus EPS estimate of $4.47 for the next quarter, ending September 30, 2021, represents a 27.4% improvement year-over-year. UNH surpassed consensus EPS estimates in each of the trailing four quarters. The consensus revenue estimate of $70.76 billion for the next quarter represents an 8.7% gain from the prior year period. Analysts expect the stock’s EPS to grow at a 12.8% rate per annum over the next five years. The stock has gained 29.6% over the past six months and closed yesterday's trading session at $397.35.
It’s no surprise that UNH has an overall A rating, which equates to Strong Buy in our POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
The stock has an A grade for Stability, and a B grade for Value, Sentiment, and Quality. Click here to see the additional ratings for UNH (Growth and Momentum).
UNH is ranked #2 of 11 stocks in the B-rated Medical - Health Insurance industry.
Anthem, Inc. (ANTM)
ANTM operates as a health benefits company that offers a broad spectrum of network-based managed care plans and services to large and small groups, individuals, Medicaid, and Medicare markets. The company offers an array of specialty and other insurance products and services such as pharmacy and radiology benefits management, dental, vision, life and disability insurance benefits, and analytics-driven personal health care.
On May 19, 2021, ANTM collaborated with Epic, a privately held healthcare software company, to facilitate secure, bi-directional exchange of health information between healthcare providers and ANTM's affiliated health plans. Epic’s Payer Platform will be integrated with ANTM’s Health OS to leverage data-driven insights in care decisions, simplify healthcare, and ultimately improve health outcomes. Both the companies are looking forward to a long-term partnership in advancing digital health.
ANTM completed its acquisition of myNEXUS, Inc., a comprehensive home-based nursing management company for payors, on April 29. The addition of myNEXUS will enable ANTM to deliver whole-person care and offer a seamless end-to-end experience that will help improve outcomes, reduce readmissions and improve members’ and their family’s experience of wellbeing.
For the fiscal first quarter, ended March 31, 2021, ANTM’s total revenues increased 9.3% year-over-year to $32.39 billion. The company’s income before tax expense came in at $2.18 billion, up 4.2% from the prior-year period. Its adjusted net income is reported to be $1.74 billion, which represents a 4.6% year-over-year improvement. ANTM's adjusted EPS increased 8.2% year-over-year to $7.01.
Analysts expect ANTM’s EPS to be $6.48 for the next quarter, ending September 30, 2021, which represents a 54.3% rise from the prior year period. It surpassed Street EPS estimates in each of the trailing four quarters. Also, the revenue is estimated to be $34.48 billion for the next quarter, representing a 12.5% rise year-over-year. ANTM's EPS is expected to grow at a 13.3% rate per annum over the next five years.
The stock has gained 43.6% over the past nine months and ended yesterday’s trading session at $377.81.
ANTM’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, which equates to Buy in our proprietary rating system.
The stock has a B grade for Value, Stability,prior-year, and Quality. Click here to see the additional ratings for ANTM (Growth, Sentiment, and Momentum).
ANTM is ranked #4 in the same industry.
Cigna Corporation (CI)
CI is a health services company that offers medical, dental insurance, and related products and services. The company distributes its products and services through insurance brokers and consultants, directly to employers, and through private and public exchanges.
On June 3, 2021, Hologic, Inc. (HOLX), a global leader in women’s health, announced that CI had updated its medical policy to cover the Acessa Laparoscopic Radiofrequency Ablation (Lap-RFA) procedure as a medically necessary procedure. According to HOLX, approximately 75% of women in the U.S. are affected by fibroids, and limited insurance coverage has caused them to settle for interventions that may not align with their treatment goals. Both companies expect this new development to provide various treatment options to women and expand HOLX’s access in the women’s healthcare market.
On May 20, CI and OSCR announced plans to make their ‘Cigna Administered by Oscar,’ a small group health insurance plan, available to small businesses across 15 Arizona counties, beginning July 1. Covered employees will have access to no-cost, 24/7 virtual doctor visits, low-cost prescription coverage, behavioral health support, and CI’s networks of quality physicians, specialists, and hospitals. Both companies hope this plan will generate sales in the coming months.
CI’s adjusted revenues for the first quarter, ended March 31, 2021, increased 6.8% year-over-year to $40.99 billion. The company’s pre-tax income came in at $1.51 billion, up 8.3% from the prior-year period. Its EPS increased 4.8% year-over-year to $3.30. As of March 31, 2021, the company had $6.54 billion in cash, cash equivalents, and restricted cash and cash equivalents.
Analysts expect CI’s EPS for the next quarter, ending September 30, 2021, to be $5.52, up 25.1% year-over-year. It surpassed the Street’s EPS estimates in three of the trailing four quarters. For the next quarter, analysts expect CI’s revenue to be $41.72 billion, representing a 2.2% rise from the prior year period. CI has gained 40.6% over the past nine months to close yesterday’s trading session at $236.69.
CI’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our proprietary rating system.
The stock has a B grade for Value and Sentiment. We have also graded CI for Growth, Stability, Quality, and Momentum. Click here to access all CI's ratings.
CI is ranked #3 in the same industry.
Humana Inc. (HUM)
HUM is a health and well-being company that operates through Retail, Group and Specialty, and Healthcare Services segments. The company offers commercial fully-insured medical and specialty health insurance benefits, coordinated health care through health maintenance organizations, and administrative services products. It offers its products to employer groups, government-sponsored plans, and individuals.
HUM has been awarded a new, four-year contract with the West Virginia Public Employee’s Insurance Agency (PEIA) on June 15, 2021. HUM will continue to provide health insurance coverage for the state’s 54,000 Medicare-eligible retirees and their Medicare-eligible dependents, effective January 1, 2022.
On June 14, 2021, HUM signed a definitive agreement to acquire One Homecare Solutions (onehome), an integrated home-based post-acute care provider, from WayPoint Capital Partners. The acquisition will further advance HUM’s strategy to build a new Value-Based Home Health model that will improve patient outcomes, increase satisfaction for patients and providers, and provide greater value for health plan partners. Both members are looking forward to this continuing long-term partnership.
HUM’s adjusted consolidated revenues for the fiscal first quarter ended March 31, 2021, increased 9.6% year-over-year to $20.75 billion. The company’s adjusted pre-tax income was reported at $1.26 billion, which represented a 21.3% year-over-year improvement. Its net income increased 75.1% year-over-year to $828 million. Its adjusted EPS increased 42% from the prior-year period to $7.67. The company had cash and cash equivalents of $3.88 billion, as of March 31, 2021.
The consensus EPS estimate of $4.97 for the next quarter ending September 30, 2021, represents a 61% rise from the prior year period. HUM surpassed Street EPS estimates in each of the trailing four quarters. The consensus revenue estimate of $20.28 billion for the next quarter represents a 7.7% year-over-year improvement. Analysts expect the stock’s EPS to grow at a 13.5% rate per annum over the next five years. HUM has gained 9% over the past six months and closed yesterday’s trading session at $428.94.
HUM’s POWR Ratings reflect its solid prospects. The company has an overall B rating, which translates to Buy in our proprietary ratings system.
HUM has a B grade for Value and Quality. In addition to the POWR Ratings grades we’ve just highlighted, one can see HUM’s ratings for Growth, Sentiment, Stability, and Momentum here.
HUM is ranked #5 in the same industry.
UNH shares were trading at $390.98 per share on Friday afternoon, down $6.37 (-1.60%). Year-to-date, UNH has gained 11.89%, versus a 11.78% rise in the benchmark S&P 500 index during the same period.
About the Author: Sweta Vijayan
Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market.4 Health Insurance Stocks That Are a Better Buy Than Clover appeared first on StockNews.com